BNM: Surcharges on payments via debit, credit cards not allowed

PETALING JAYA: Retailers are not permitted to impose surcharges for payments made with debit and credit cards under the Payment Card Reform Framework, according to Bank Negara Malaysia (BNM).

The central bank also clarified that the response provided by Deputy Finance Minister Datuk Othman Aziz in the Dewan Rakyat was with reference to the interest imposed by credit card issuers on cardholders for outstanding credit card balances that are overdue, and not on surcharges imposed by retailers on transactions paid with credit or debit cards.

BNM said in a statement yesterday that the surcharge prohibition is applied on payments via credit cards under the rules of international card schemes such as Visa and MasterCard.

“The prohibition on surcharges is monitored and enforced by banks that provide e-payment facilities to merchants (acquiring banks). Consumers who encounter merchants that impose surcharges are advised to lodge a complaint with their respective banks or payment card issuers.”

This was in response to the Consumers Association of Subang and Shah Alam, Selangor’s call to abolish surcharges on debit and credit card transactions.

The central bank explained that one of the reasons retailers impose a surcharge is to recover the cost incurred when accepting payments made via cards.

“Retailers are typically charged a transaction fee, also known as the Merchant Discount Rate (MDR). In general, the MDR for credit card is higher than the MDR for debit card.”

BNM said retailers are encouraged to accept the more cost-effective payment methods, i.e. debit cards and mobile payments (instant fund transfers) in order to benefit from lower operational cost.

“Retailers who cannot afford to pay the higher MDR for credit card are encouraged to liaise with their respective acquiring bank to accept only debit card payments.”

In Malaysia, the central bank has introduced measures such as the Payment Card Reform Framework and the Interoperable Credit Transfer Framework to lower the cost to retailers when accepting cost-effective electronic payment methods, which would in turn lessen the pressure for retailers to impose surcharges on customers.

BNM said globally, countries have adopted different approaches in dealing with the issue of surcharges imposed by retailers for card payments.

“In the European Union and the UK, retailers are prohibited from imposing a surcharge on consumers for credit and debit card transactions.

“In Australia, retailers have the right to impose surcharge on customers who pay using the more expensive payment cards such as the credit card. The rationale of such approach is to send the correct price signal to encourage consumers to pay using the more cost-effective debit card,” the central bank explained.