Retailers should be banned from adding card surcharges
‘‘Acup of tea and a yoghurt please’’. The coins were jingling as I counted out exactly £4.30 (NZ$7.60) to give to the British Airways flight attendant. But as I tried to put the money in his hand he recoiled in horror.
‘‘Madam, we don’t accept cash,’’ he hissed loudly. ‘‘Cards only, madam, do you have a card with you today, madam?’’
For goodness sake, of course I have a card. This Kiwi accent doesn’t make me backward. You Brits really are a pain in the backside.
Our national airline will give you a cuppa for free and I think you’ll find we led the world in card technology. I paid for my textbooks in 1988 with an eftpos card, young man. Your Chip and Pin is a latecomer.
Rest assured this was all muttered in my head and no diplomatic incident occurred. Cards and Twinings were exchanged with a contactless flourish and the trolley rolled on down the aisle.
The irony of it makes me chuckle. One minute we have retailers adding a surcharge if you pay with a credit card and the next minute we have cash being banned. We can’t win. Cash is costly to process.
It’s manual, it’s got security issues and has to be physically transported to a bank. We need to stop thinking it’s free. It’s only desirable to thieves operating in the grey market, who don’t want to pay their share of tax.
This morning I woke up in Britain and the UK Treasury moved another step closer to encouraging the cashless society. From January, they are banning retailers from adding on any fee for using a card.
Budget airlines are one of the worst pests at this practice. The British have gone one step further than the EU directive that drove this new law. They’ve also banned surcharges on debit cards, Paypal, payWave (contactless cards) and Apple Pay (on phones), as these go via the credit card system to get processed.
Rest assured, this is no free lunch for consumers. Many retailers will have to adjust their prices and spread their transaction costs over everyone. If you pay using a cheap method and the woman behind you in the queue whips out a credit card, you’ll be funding her choice to some extent.
In New Zealand there has been debate on the topic as our eftpos system has very minimal costs for retailers, making the gap wider between the payment choices.
No doubt there will be loud squeals that our payment systems are different and we shouldn’t punish those using eftpos with higher prices.
I disagree with that. We should absolutely follow the Brits and ban retailers from separating out a basic business cost into an add-on fee.
Retailers get charged by their banks. I don’t care. It costs them time and money to count cash, balance their till and drive it around to the local branch. I don’t care. Just put a price on goods that allows for the cost of trading.
Interchange fees have positive advantages for retailers taking our money. They pay for the fraud prevention teams at banks and they allow us to have interest-free days on our credit cards – effectively a mini-financing tool that lets us spend more with retailers. We have confidence with online security and buy from retailers we’ve often never heard of. Gaining our confidence has a commercial cost.
As consumers we need to accept that businesses spread costs all the time. Some of us sit outside in puffer jackets drinking coffee, while others enjoy the heating in the cafe´ . Every customer has a different cost of interacting and we absorb this in the final price.
When the law allows businesses to add a surcharge, competition will not flourish. An individual consumer cannot keep interchange fees low. But a bunch of businesses that are banned from adding a fee will be commercially motivated via their industry groups, retailers associations or sheer size to negotiate lower percentages, in order to keep prices lower and sales flowing.
The British have made the right call on this one.
The UK Treasury has moved another step closer to encouraging the cashless society.