Tuesday, June 25, 2024

Credit card surcharge changes to lower prices

According to IBISWorld, Changes to credit card surcharge and interchange fees are expected to reduce revenue for payment providers and the banking sector while providing lower prices for some goods and services for consumers.

“The main change is the cap placed on surcharges that are charged by businesses to customers, which cannot exceed merchants’ costs for accepting the card system,” IBISWorld Senior Industry Analyst Tommy Wu said. “Rather than charging a flat fee, it will be a percentage of the transaction value.”

A cap placed on interchange fees (0.8 per cent of transaction value) will also reduce payment costs by merchants to the payment providers. The surcharge cap comes into effect on September 1, 2016 for large merchants and September 1, 2017 for other merchants. The interchange standards come into effect from July 1, 2017.

“The interchange cap will likely reduce revenue to payment providers such as Mastercard and VISA,” Mr Wu said. “Similarly, the cap is likely to reduce revenue for the banking sector.

“For consumers, the caps placed on surcharges and interchange fees are expected to help lower the prices of goods and services across all payment methods. As part of the interchange, fees generated by the banks are put towards credit card rewards schemes – the value of these rewards is also likely to fall for consumers.”

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