Good news or bad news? Government bans credit card acceptance fees from January

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In a surprise announcement, the Government has decided to ban credit card acceptance fees from 13th January 2018. This is the next move after the EU cap on interchange fees – if retailers are meant to be paying no more than 0.3% to accept standard Visa and Mastercard products, the Government must think that they can afford to absorb the fee altogether.

From the viewpoint of HfP readers, this will mean the end of credit card fees when booking flights. (Of course, the BA fee has always been voluntary for those in the know …..)

More importantly, though, you may be excited by the additional possibilities for running up credit card spend to earn more miles and points.

After all, no-one will be charging after 13th January so surely life will be better?

Real life isn’t that simple, of course.

As retailers who read HfP always point out in our comments section, fees for shops have not come down to 0.3% for anyone not called Tesco. This is because charges to retailers include the rental of payment terminals and various other services which lead to a far higher overall fee.

On the other hand, as a reader pointed out yesterday, he is charged 0.6% by his bank for depositing CASH. Given that it also needs staff time to count and sort it, he would be happier if all his customers used cards.

This ban will disproportionately impact the acceptance of American Express, since Gold and Platinum cards are not impacted by the interchange fee cap. Stores will also be hit hard if they accept business, ‘premium’ (eg World Elite) or foreign Visa and Mastercard products.

Whether this decision turns out to be a ‘win’ for American Express, or card acceptance in general, remains to be seen.

Don’t get carried away by the potential for HMRC acceptance

I had a few emails yesterday from readers who were delighted that they would be able to pay their income tax, PAYE, VAT etc for free with their credit card from next January.

These people are living in fairy land.

At the moment, HMRC charges you – almost exactly – the interchange fees levied by Visa or Mastercard. These are:

VISA Personal Credit Card 0.415%
Mastercard Personal Credit Card 0.386%
Mastercard World Premium Credit Card 0.374%
Mastercard Signia Premium Credit Card 0.606%
Mastercard Elite Premium Credit Card 0.606%

VISA Business Credit Card 1.508%
VISA Corporate Credit Card 1.744%
VISA Purchasing Credit Card 1.755%
Mastercard Business Credit Card 1.973%
Mastercard Corporate Credit Card 2.248%
Mastercard Purchasing Credit Card 2.406%
Mastercard Fleet Credit Card 2.134%

Anyone who thinks that HMRC is going to absorb a credit card charge of as much as 2.406% is dreaming. It is more likely that the Revenue stops accepting credit cards.

Even at 0.386% it would be a noticeable hit to tax revenue if every small business, sole trader or individual with additional non-PAYE income started to use a card.

The only reason it may continue is that …. well …. it’s the Government we’re talking about here.

Speaking personally, though, I think I will be paying my January 2018 tax bill BEFORE 13th January (for a 0.38% credit card fee) rather than gambling that the facility will still be available after that.

Want to earn more points from credit cards? – December 2021 update

If you are looking to apply for a new credit or charge card, here are our November 2021 recommendations based on the current sign-up bonus.

You can see our full directory of all UK cards which earn airline or hotel points here. Here are the top current deals:

British Airways BA Amex American Express card

British Airways American Express

5,000 Avios for signing up, no annual fee and an Economy 2-4-1 voucher for spending ….. Read our full review

British Airways BA Premium Plus American Express Amex credit card

British Airways American Express Premium Plus

25,000 Avios and the UK’s most valuable credit card perk – the 2-4-1 companion voucher Read our full review

American Express Preferred Rewards Gold

Your best beginner’s card – 20,000 points, FREE for a year & two airport lounge passes Read our full review

The Platinum Card from American Express

30,000 points and an unbeatable set of travel benefits – for a fee Read our full review

Earning miles and points from small business cards

If you are a sole trader or run a small company, you may also want to check out these offers.

American Express Business Gold

20,000 points sign-up bonus and free for a year Read our full review

American Express Business Platinum

40,000 points sign-up bonus and a long list of travel benefits Read our full review

British Airways Accelerating Business American Express

30,000 Avios sign-up bonus – plus annual bonuses of up to 30,000 Avios Read our full review

Capital On Tap Business Rewards Visa

The most generous Avios Visa or Mastercard for a limited company Read our full review

For a non-American Express option, we also recommend the Barclaycard Select Cashback card for sole traders and small businesses. It is FREE and you receive 1% cashback on your spending:

Barclaycard Select Cashback Credit Card

1% cashback and no annual fee Read our full review

Category

General

This article is closed to new posts. Discussion continues in the HfP Forums.

Ah says:

20 Jul20 July 09:01

its good news imo.

Accepting credit cards is part of doing business.
Fees or surcharges should not be passed on to the consumer.
Its a choice the business has taken to accept plastic. Now would they rather have the business from taking plastic or not?
I am sure these expense of taking plastic ends up in the annual accounts somewhere anyway.
Memesweeper says:

20 Jul20 July 09:57

I don’t expect HMRC card payment options to disappear as they are linked to the actual charge. Also HMRC are not selling you anything nor providing a service, so no doubt the regulations will not apply to them.

AFAIK there is nothing to stop a discount for cash (or debt card) at the checkout. Just as long as the fees are bundled into the up-front price.
- RussellH says:
  
  20 Jul20 July 10:44
  
  I recently noticed a number of ‘gas stations’ in the USA with dual pricing – a lower cash price and a higher credit card price. Then others charged a fee for debit cards, but not cash or credit cards.
  - the_real_a says:
    
    20 Jul20 July 13:36
    
    The US market is dysfunctional. Advertised Price + State Tax + Card Fees + Tips = Actual price of goods/service
    - Rob says:
      
      20 Jul20 July 13:43
      
      I bought an $8 can of beer in NY the other week and it ended up at $11ish. Sales tax, then card machine insisted I pick a tip from the options of 15 / 20 / 25%. This was for reaching into a fridge and passing me the can.
      - Alan says:
        
        20 Jul20 July 20:36
        
        Haha at first I misread that as a vending machine asking for a tip and sadly wasn’t surprised 😀
        
        Tipping culture in US is bonkers – a even $1/beer the bar staff are making way way more than minimum wage in an evening, even before accounting for their wage! I also remember SuperShuttle website asking me what tip (15-25%) I wished to give *in advance of the ride*! So tip before having the service – thankfully gave nothing given it was a dreadful driver with a broken windscreen!
    - RussellH says:
      
      20 Jul20 July 15:58
      
      Motor fuel in the USA seems to be the one area where stuff is advertised at an all inclusive price as here in Europe.The price you see is really what you pay.
- Mr Dee says:
  
  20 Jul20 July 15:34
  
  Agree!
mark2 says:

20 Jul20 July 10:12

Personally I regard the price of the energy to be more important than which card they accept, although British Gas are usually expensive.
- Genghis says:
  
  20 Jul20 July 10:24
  
  I’d always go with the cheapest one but many of them accept Paypoint payments if you request a card. I did the BG MSE collective switch last year and I pay at Co Op Paypoint using Amex.
  - Polly says:
    
    20 Jul20 July 10:54
    
    Yes we prepaid our SSE every couple of months with Amex at co op…then it jumped on renewal. Now have to pay AFFECT by dd. V g deal tho. They say they don’t do PP but l must ask them again.
    Just my darn council tax cannot get a PP or PO card.
    When our insurance company decided to slap a 2.5% fee l challenged them, and they refunded it. Said they were unaware of any eu fee changes! Unlikely…
  - Nick M says:
    
    20 Jul20 July 13:02
    
    I did the same, but currently just have a small DD set up rather than a PayPoint card. You can make adhoc top-ups via Visa/Mastercard in the app though; this was handy when Sainsburys including the prepaid Visa cards in a 15% off promotion
Matt says:

20 Jul20 July 10:30

This move is not a surprise – it is part of the EU PSD2 regulation, which member states are required to bring into national law. The rule in PSD2 is that surcharging cannot be applied to consumer EU issued cards after January 13th 2017 – this is merely the UK government announcing this will be brought into UK law, as required in any case.

Note that nothing stops a website or store raising their prices. Nothing stops a company putting the card fee into a so called booking fee, they just can’t call it a card fee explicitly anymore.
RussellH says:

20 Jul20 July 10:49

> Stores will also be hit hard if they accept business, ‘premium’ (eg World Elite) or foreign Visa
> and MasterCard products.

In my experience all personal Visa and standard (ie not ‘World’ etc) Mastercards were charged at exactly the same rate, whether UK, EU, or rest of the world.

It was foreign DEBIT cards that I got stung for at 2.6%. It only happened once, thank goodness, when an Australian customer used a Debit MasterCard. It would have been the same for EU debit cards!
bigpapc says:

20 Jul20 July 11:11

OT: I can’t seem to see any AA flights on BAEC to book with avios, on any route, for any dates. Is this just me? Or was there some change to the system that I missed?
- ct says:
  
  20 Jul20 July 11:39
  
  http://onemileatatime.boardingarea.com/2017/07/18/british-airways-website-american-award-availability/
  - bigpapc says:
    
    20 Jul20 July 11:49
    
    Thanks. Hope they fix it.
pr99 says:

20 Jul20 July 11:17

What the government says and what the government does is not necessarily the same thing.
KJM says:

20 Jul20 July 11:17

“Of course, the BA fee has always been voluntary for those in the know ….”

I’m not ‘in the know” .. please can you enlighten me?

Thanks
- Peter K says:
  
  20 Jul20 July 12:02
  
  Some people live in the Ukraine apparently.
  - Genghis says:
    
    20 Jul20 July 13:17
    
    Or simply “Ukraine”
    - Peter K says:
      
      20 Jul20 July 23:07
      
      True. It’s only The (Republic of the) Gambia and The (Commonwealth of the) Bahamas that should have a definite article.
      
      Apparently The Ukraine is a throwback to when it was part of the USSR (it meant “the borderland”). I apologise for my English 🙂
      - Peter K says:
        
        20 Jul20 July 23:08
        
        http://www.bbc.co.uk/news/magazine-18233844