Eu Rules Threaten Free Banking And Credit Card Cashback

[interestrateripoff]

http://www.telegraph.co.uk/finance/personalfinance/consumertips/banking/10036356/EU-rules-threaten-free-banking-and-credit-card-cashback.html

Free banking could disappear under European plans to cap or scrap the fees that underpin the payment card system.

Planned reforms of the system could lead to charges for using a debit or credit card, with cashback, rewards and interest-free periods on cards becoming a thing of the past, experts warn.

The UK Cards Association, which represents the debit and credit card industry, said the European Commission's plans would hurt British consumers for little or no corresponding benefit.

"The British are used to, and like, free banking," said Richard Koch, a senior executive at the Cards Association. "The commission's model would impact on the card issuers' ability to continue that."

The EC issued a Green Paper last year, suggesting regulation of the system, which it said would make the market more competitive.

Scaremongering or would this threaten free banking? If it does its clearly going to be a godsend for UKIP.

Clearly the only people who should have interest free periods or near zero interest rates are bankers everyone else can go feck themselves.

[Harry Monk]

There's no way I would ever pay a bank to lend it my money.

[Butthead]

The EC issued a Green Paper last year, suggesting regulation of the system, which it said would make the market more competitive.

War is peace

Freedom is slavery

Ignorance is strength

[Wurzel Of Highbridge]

All of the banks charge over here in Eire, even Ulster Bank (RBS). You have to keep €3k in your current account to stop them charging you.

[tinker]

War is peace

Freedom is slavery

Ignorance is strength

Idle Hans.

Edited May 5, 2013 by tinker

[Harry Monk]

All of the banks charge over here in Eire, even Ulster Bank (RBS). You have to keep €3k in your current account to stop them charging you.

So if I lent Ulster Bank €2,999 they would want me to pay them for lending it to them?

This takes "An Irish joke" to a whole new level!

[MongerOfDoom]

Scaremongering or would this threaten free banking?

Of course it's complete ********. At most it would end "free" credit cards. Not before time either. There is a horrible conflict of interest whereby Visa/MC/AE get to skim off a non-trivial percentage of all retail turnover. They somehow managed to set up a situation where it's in "everyone's" interest for retailers to increase their prices by the cost of card processing fees. The higher prices are then charged to everyone, including those who use cards that are cheap to process or cash.

If you ask me, retailers should be made to pass any card processing fee onto the customer. Not some notional figure they think of, but the exact amount it cost them. Then there would be a reason for the card companies to compete on cost rather than on who can come up with a more deranged loyalty point scheme, or who provides better free travel insurance for pets.

[R K]

There's no such thing as free banking.

Unless you're a banker.

[gf3]

Of course it's complete ********. At most it would end "free" credit cards. Not before time either. There is a horrible conflict of interest whereby Visa/MC/AE get to skim off a non-trivial percentage of all retail turnover. They somehow managed to set up a situation where it's in "everyone's" interest for retailers to increase their prices by the cost of card processing fees. The higher prices are then charged to everyone, including those who use cards that are cheap to process or cash.

s.

Cash may cost more to process than cards

Edited May 5, 2013 by gf3

[MongerOfDoom]

Cash my cost more to process than cards

In that case you can add the cost of cash processing, or maybe a credit for it. Net effect is that people using debit cards would get the lowest price.

The current system is that everyone is charged the cost of using a CC. Hence people use CCs even though they would not be willing to pay the cost of doing so given the choice. I think that is exactly the sort of situation that should be addressed by legislation, seeing as a stroke of a pen can cut everyone's shopping bill by somewhere in the region of 1%. I would like to hear a sane argument against, and "we may not be able to have free credit cards any more" is not really it.

[mfp123]

its too much interference over how a business markets is products. free banking is like free delivery, or if a supermarket wants to offer you buy one get one free. its a business tool.

its up to a business how it runs its business model.

[The Ayatollah Buggeri]

I would like to hear a sane argument against...

The types of retail business that are currently allowed to charge for credit card payments as a separate line item already charge vastly in excess of the actual cost. A certain Irish airline springs to mind, but it's not the only one. Were you to outlaw the practice of, in effect, bundling the credit card cost into the sticker price for all retail businesses, I'm sure they would do likewise. We would also end up like the United States, in that the price you see on the shelf (of supermarkets, for example) is no longer the price you actually pay. In America, it's because sales tax is added on at the checkout. In this scenario, it would be because the cost of your chosen payment method would be added. Because we're not used to that here, there would be howls of protest, especially from lower income people who tend to like to pay for things with cash, when they get to the checkout and discover that their bill is not £31.56, but £38.21 (for example). Were you to attempt to regulate the system to prevent the card charges being in excess of what the use of the card actually cost, the regulatory infrastructure required would be huge.

Secondly, the likely outcome of such legislative change is that cash would become the most expensive payment method available, given the handling and security overheads (as someone noted above). That would result in complaints of social exclusion, etc. etc. There would be huge political pressure to legislate such that the cost of paying by cash remained 'free', and so the cost of that would be hidden in the sticker price of the item, just as card fees are at the moment.

[MongerOfDoom]

The types of retail business that are currently allowed to charge for credit card payments as a separate line item already charge vastly in excess of the actual cost. A certain Irish airline springs to mind, but it's not the only one. Were you to outlaw the practice of, in effect, bundling the credit card cost into the sticker price for all retail businesses, I'm sure they would do likewise.

Not for very long they wouldn't. Some airlines will actively abuse their passengers, including imposing excessive fines for things like not having a boarding pass that would cost pennies to print (if it fulfils a useful purpose at all), or taking an extra 100g of luggage. There is a reason why supermarkets and most other companies do not do that sort of thing to their customers, and I expect it would be the same reason that would stop them charging insane CC fees.

We would also end up like the United States, in that the price you see on the shelf (of supermarkets, for example) is no longer the price you actually pay. In America, it's because sales tax is added on at the checkout. In this scenario, it would be because the cost of your chosen payment method would be added. Because we're not used to that here, there would be howls of protest, especially from lower income people who tend to like to pay for things with cash, when they get to the checkout and discover that their bill is not £31.56, but £38.21 (for example). Were you to attempt to regulate the system to prevent the card charges being in excess of what the use of the card actually cost, the regulatory infrastructure required would be huge.

The price on the shelf could be the highest possible, or the price when paid in cash. Either is fine, seeing as they won't differ very much. Or you could just display all the possible prices, seeing as the price labels are already computer generated. But I don't see this is a huge problem either way.

Secondly, the likely outcome of such legislative change is that cash would become the most expensive payment method available, given the handling and security overheads (as someone noted above). That would result in complaints of social exclusion, etc. etc. There would be huge political pressure to legislate such that the cost of paying by cash remained 'free', and so the cost of that would be hidden in the sticker price of the item, just as card fees are at the moment.

I don't see a problem with giving people who use a card that is cheap to process a discount compared to paying cash. As long as the final price differs precisely the same way as the cost difference between the payment methods, it will fulfil the purpose of encouraging card companies to behave competitively. I fail to see why they would bother the way things are.

It seems to me I pay VISA/MC/AE over a 100 pounds a year for the convenience of knowing precisely how much a particular product I buy will cost at checkout. I think I'd rather keep the cash ....

[mfp123]

I don't see a problem with giving people who use a card that is cheap to process a discount compared to paying cash. As long as the final price differs precisely the same way as the cost difference between the payment methods, it will fulfil the purpose of encouraging card companies to behave competitively. I fail to see why they would bother the way things are.

It seems to me I pay VISA/MC/AE over a 100 pounds a year for the convenience of knowing precisely how much a particular product I buy will cost at checkout. I think I'd rather keep the cash ....

its makes no difference. its just a different way in which the information is presented.

if i say something costs £100 + £3 if you pay in cash, or its costs £103 and you get £3 off if you pay by card, it makes no difference, its just a different form of presentation, and there is no saving to be made anywhere.

ultimately the cost of processing a payment is a business cost, the same as wages, lighting, rent, marketing.

if ryan air wants to break prices down per service they should be able to , whilst if BA wants a flat price with everything included it should be able to.

if a company wants to work out the average it costs for all payment transactions e.g lets say 2%, it can charge everyone £102 and not offer any surcharge or discount no matter what payment method you use.

this choice should be up to how the business wants to do it.

i could even say this product costs £110 and you get an £8 discount if you pay by cash and a £10 discount if you pay by card.

Edited May 5, 2013 by mfp123

[MongerOfDoom]

its makes no difference. its just a different way in which the information is presented.

The whole point is that we are probably being overcharged for payment processing because the card companies have no incentive to keep the costs low.

this choice should be up to how the business wants to do it.

I don't think you can resolve the argument simply by stating your preferred outcome. We let business make the choice, and the outcome is seriously suboptimal for everyone. You could argue that the odd percent in extra cost does not matter, but then let's fix it and put VAT up to compensate. Maybe impose a 1% VAT rate on food too if that does not matter either.

[mfp123]

The whole point is that we are probably being overcharged for payment processing because the card companies have no incentive to keep the costs low.

I don't think you can resolve the argument simply by stating your preferred outcome. We let business make the choice, and the outcome is seriously suboptimal for everyone. You could argue that the odd percent in extra cost does not matter, but then let's fix it and put VAT up to compensate. Maybe impose a 1% VAT rate on food too if that does not matter either.

youre not being overcharged for payment processing you are being charged a final price. offering surcharges or discounts on a total price is just a marketing tool. i can choose not to offer any surcharge or discount based on payment if i so choose.

its the same as free delivery vs paying a delivery charge at checkout. its just a marketing tool. if it costs £3 to ship something but i want to charge £5, or £50 or £100, or nothing at all, its up to the business to set it at what it wants.

there should be no requirement for a business to charge you the exact amount it costs to process something, because that processing cost is just a business cost like lighting or heating.

the fact that some companies add a processing charge is because they want to show a lower headline price, and a different way of marketing something to you.

businesses are not thick. the actual price of something is set at whatever they want no matter how they explain the breakdown of the charges to you.

there should be no need to set an exact cost of processing anymore than they need to set a price based on how much it costs to store an item, or ship it or wrap it, or box it up.

Edited May 5, 2013 by mfp123

[The Spaniard]

"Free" banking to sweeten your participation in the rent-a-currency money system.

A bit like being given free use of a spade to work the bit of land that the landlord rents to you.

Much cheaper to own your share of the land and to pay for whatever tools you need.

It's the overall rent on the broad money supply that collectively costs us all dear, not the trimmings.

[MongerOfDoom]

youre not being overcharged for payment processing you are being charged a final price.

This completely misses the point. It is possible to make the price lower by ensuring it's not in the retailers interest to throw money at the card companies. Or it would be possible to raise more tax by taxing credit card transactions without increasing the final price.

businesses are not thick. the actual price of something is set at whatever they want no matter how they explain the breakdown of the charges to you.

They are not stupid. The trouble is that not taking cards would cost them more money than they lose by overcharging people who don't use cards. So then everyone uses cards even though few would be willing to do so if they had a way of avoiding the cost. And the government can give us a way of avoiding that cost by legislating. My view is that it would benefit everyone except the card companies.

Have you noticed how it makes a lot of sense for the government to regulate and prevent monopolies? Your argument "but they tell you how much it costs, and you can take it or leave it" applies there just as well.

[Bloo Loo]

there must be terrible consumer issues with free banking and credit cards in Europe for a regulator to dictate stuff.

All we want is fairness and total disclosure....the glare of this will be enough to keep rogues back in the shadows.

create a rule and the rogues reword stuff and hide it all again.

Still, nanny knows best.

Course, regulating lenders of mortgages would be out of the question, I mean, global collapse is of no concern to the regulators...thats in the hands of the clever and oh so sincere banking elites.

[DEATH]

It says debit card transactions only cost 9p, surely this is cheaper than actually handling pieces of paper and dirty bits of

metal for the majority of retailers?

Cash isn't free to use for most businesses, they are charged for depositing cash and having cash delivered, collected etc.

People like to steal it too, sometimes with ultra-violence.

Cash is destined to disappear one day, it's not like it is actually worth anything.

Edited May 6, 2013 by DEATH

[SpectrumFX]

The whole point is that we are probably being overcharged for payment processing because the card companies have no incentive to keep the costs low.

Profit motive?

[mrtickle]

The types of retail business that are currently allowed to charge for credit card payments as a separate line item already charge vastly in excess of the actual cost. A certain Irish airline springs to mind, but it's not the only one.

The law changed recently. As last month they are now NOT ALLOWED to charge in excess of the actual cost. This was covered on BBC Money Box. Cinema/theatre ticket "booking fees" also come under this. If any airline or holiday company is still slapping on high charges for paying by Credit card or Debit card, they are now BREAKING THE LAW!

[mfp123]

This completely misses the point. It is possible to make the price lower by ensuring it's not in the retailers interest to throw money at the card companies. Or it would be possible to raise more tax by taxing credit card transactions without increasing the final price.

They are not stupid. The trouble is that not taking cards would cost them more money than they lose by overcharging people who don't use cards. So then everyone uses cards even though few would be willing to do so if they had a way of avoiding the cost. And the government can give us a way of avoiding that cost by legislating. My view is that it would benefit everyone except the card companies.

Have you noticed how it makes a lot of sense for the government to regulate and prevent monopolies? Your argument "but they tell you how much it costs, and you can take it or leave it" applies there just as well.

i dont understand what you mean when you say it will lower transaction costs. how would you lower a card transaction cost? for starters, the more transactions you use by card the lower the transaction cost is for the retailer.

also id reiterate again it not up to the customer which business costs they can opt in and out of. you cant say as a consumer, im not paying 5% extra on the product for the pointless TV marketing campaign you took on for product X because i never saw the advert.

card transaction fees are a business cost. the retailer asks its bank for a service, the bank charges the retailer for it. the consumer is not in the equation.

Edited May 6, 2013 by mfp123

[gf3]

i dont understand what you mean when you say it will lower transaction costs. how would you lower a card transaction cost? for starters, the more transactions you use by card the lower the transaction cost is for the retailer.

also id reiterate again it not up to the customer which business costs they can opt in and out of. you cant say as a consumer, im not paying 5% extra on the product for the pointless TV marketing campaign you took on for product X because i never saw the advert.

card transaction fees are a business cost. the retailer asks its bank for a service, the bank charges the retailer for it. the consumer is not in the equation.

Interesting thought maybe blind people should get a discount because they shouldn't have to pay for lighting the shop.

[MongerOfDoom]

i dont understand what you mean when you say it will lower transaction costs. how would you lower a card transaction cost? for starters, the more transactions you use by card the lower the transaction cost is for the retailer.

At the moment I have no incentive whatsoever to use a debit card instead of a CC, so I don't. I have to pay the cost of using a CC, but I would not get a discount if I decided to save the retailer money by using a payment method that would be much cheaper to process. In fact, I don't even know how much the transaction cost is, despite paying it. There are costs which the government cannot easily help me avoid, but in this case they can trivially legislate to give everyone the right incentives. If an extra 1% in processing costs means an extra 1% on the bill, the chances are that the processing costs will come right down because most people will choose whatever payment method is most efficient.

There might be practical issues as the resident Ayatollah has pointed out, but my view is that we are each paying an enormous amount for the convenience of knowing precisely how much an item displayed in a shop will cost at the checkout. It's not like you cannot ask if you care, and you would still know the answer to within a few percent just by looking at the sticker.