Currently, interchange is a fee paid by a merchant when the merchant chooses to accept credit cards. When merchants accept cards it provides benefits for them and makes an easy and secure payment experience for you. A market-based fee is negotiated between a merchant and the credit card acquirers for the cost of using their payment system including the benefits and risk associated with the card.
Can you afford to subsidize billions in profits for big retailers? Big retailers are lobbying the EU to impose a cap on the interchange rate so they can make more profits at the expense of consumers and small merchants. The interchange cap desired by big retailers will raise fees, limit access, and reduce benefits such as rewards at the expense of you and smaller merchants.
Flexible interchange rates ensure the lowest cost for transactions for you.
Flexible interchange rates promote credit availability so you can focus on the things most important to you like planning your next holiday, wedding, or even your small business.
The EU is united in fostering innovation in our digital economy. Capping interchange fees gets in the way of this, making credit and debt card transaction purchases difficult. This gets in the way of our ability to be the leader in innovation.
Your credit card links you to the digital world we live in today. The digital market requires financial services suppliers provide efficient payment experiences by investing in innovative ways. Interchange fees stifle this innovation.
Unfortunately, the European Commission proposal and the European Parliament's position would lead to a disruption in the market that increases costs of using your card that in turn disrupts your purchasing experience.
The interchange fee cap focuses on the merchant's needs and ignores the consumers, which in turn, hurts both parties.
This is a pure profit play for big retailers at the consumers’ expense through higher costs when using your card.
The focus should be on increasing the efficiency and transparency of electronic payments so that all parties work together to improve the European economy. Everyone wins.
Danger to unbanked consumers: When interchange is regulated and merchants no longer pay appropriate compensation for the benefits they receive, the business case for issuing prepaid cards becomes significantly strained. This means Governments will be forced to pay more to offset the costs no longer paid by merchants, forcing them to impose those costs on you. Prepaid cards provide many of the same benefits as bank debit cards at fees lower than check cashing. This proposed law would be a huge blow to the prepaid card market as the Commission's interchange fee cap proposals are likely to increase the cost of these cards.
Interchange caps have been implemented in some countries and the negative effects are overwhelming: In Australia, interchange fee caps have been implemented and as a result, consumers now pay 50% more for their cards. Australian small merchants now pay up to ten times more to accept card payments than large merchants. Fees for standard four-party credit cards increased by 22% between 2001 and 2004, while annual fees for rewards cards increased by 47%-77%. As a result, cardholders in Australia are now paying approximately AU$480 million more in additional fees for credit cards each year. Meanwhile, the value of reward points for four-party cards has declined by approximately 23%. The interchange cap has also benefited merchants to the extent of approximately AU$850 million per year but merchants have yet to show evidence these savings have been passed on to the consumers. On average, surcharges on users of four-party cards have exceeded average merchant service charges. In 2002, the Reserve Bank of Australia reduced interchange fees by some 50%, saving retailers AU$850 million a year. Unfortunately, this has meant consumers are paying some AU$500 million more in additional card use fees to cover the shortfall while the benefits have declined. This has translated into 22% more in annual fees for standard credit cards and 77% more for reward cards. On average, surcharges on users of four-party cards have exceeded average merchant service charges.
In Spain, interchange fee caps have been implemented, and as a result, there have been a 50% increase in annual fees for standard four-party payment cards, that's a total cost to consumers of €2.350 billion over a five year period. Standard four-party payment cards operations average dropped from €52.1 in 2005 to €44.3 in 2010, while the ATM operations average rose from €91.2 to €117.2. A 2005 reduction in interchange of almost 60% resulted in a 50% increase in card fees. Spanish merchants have received a reduction of €2.749 billion from interchange capping during this five-year period and there is no evidence that even a fraction of this cost saving has been passed on to consumers via reduced prices or through an improvement of the services provided.
In the United States where interchange fee capping was implemented, many no cost or low cost bank accounts were eliminated. Consumers now pay increased fees for basic deposit account services. In the United States, legislation in 2010 implemented a reduction in interchange fees of nearly 50%, saving retailers an estimated $8 billion a year, yet consumers found that they were paying more for the same products whilst paying higher charges for traditional banking services and enjoying reduced rewards.
In the United States, legislation in 2010 implemented a reduction in interchange fees of nearly 50%, saving retailers an estimated $8 billion a year, yet consumers found that they were paying more for the same products whilst paying higher charges for traditional banking services and enjoying reduced rewards.
There's an even bigger risk of harm to consumers in the UK if interchange limits are adopted because the UK compromises of around 30% of card payments in the EU. They are the largest user of credit cards (about 70% of credit card usage in the EU). The UK is the largest e-commerce market and one of the strongest innovation economies. There are 150m+ cards in the UK (90+ million debit cards with £340bn spend; 60+ million credit cards with £110bn spend) 45.7 million debit card holders, equivalent to 90% of the adult population and 30.9 million credit and charge card holders, equivalent to 62% of the adult population. All of these cardholders will be forced to pay more (at least £17 per annum for just a standard credit card; more for rewards cards
We are living in a digital economy and the EU is leading it. The digital market requires efficient payment experiences and financial services suppliers provide this experience through investing in innovative ways to make your payment experience more efficient. Interchange fees stifle this innovation. Capping interchange fees sets us back.
Retailers stand to gain as much as £2 billion with little potential that this increase in profit will be passed on to you in the form of in lower prices for items.
The Commission has yet to produce any evidence that proves retailers will pass along their savings to consumers.
You earned your credit card offer rewards like cash back or air miles; this interchange cap will limit or do away with these rewards.
If consumers are discouraged from using credit cards because of increased charges or interest rates or withdrawal of rewards as a result of these proposals they will lose the additional legal protection afforded by section 75 of the consumer credit act which states a credit card provider is equally liable if something goes wrong with a purchase costing more than £100.
The commission proposals will force card issuers to raise interest rates to recover the loss of revenue from the proposal, effecting those who make only the minimum payments on their cards the most on a long-term basis.
A huge blow to the UK pre-paid card market as the Commission's proposals are likely to increase the cost of these cards.
Your favourite retailer benefits from the use of credit cards through higher sales, lower costs of cash transportation and for securing cash on the premises, fewer losses from the use of cash, more efficient income management and a guarantee that they will receive payment. It seems unfair that consumers should take on the responsibility of paying for this service.
Cards are better than cash, for you AND retailers because they take the hassle out of doing business together. Cards provide an easy access to safely use payment when outside one's own country, like while on vacation. These interchange fee caps threaten the convenience of using your credit card.
Big retailers are lobbying the EU to impose a cap on the interchange rate so they can make more profits at the expense of consumers and small merchants.
The interchange cap desired by big retailers will raise fees, limit access, and reduce benefits such as rewards at the expense of consumers and small merchants.
In Spain, the U.S., and Australia, consumers and small merchants are now forced to pay twice in higher costs and fewer services so that big retailers can enjoy billions in profits to avoid paying their fair share.
If the EU proposal becomes law, you could be forced into a minimum purchase amount at your favourite retailer for using your card, paying with cash, or paying a fee for using your card.
Sign the Petition
Together we can reform this proposed law, but we need your help. Take a stand to protect your financial security and your wallet. The EU will act on this before the end of the year, so take action now!
Sign the petition and we'll send a letter on your behalf telling the EU and your government not to pass harmful regulations -- because your card matters.
Thank you for taking action.