Card charges shown the red card
How Will This Affect Your Business?
This blog from OnPoint Accounting explains the new rules and implications regarding card machines, charges and processing fees which will impact your business
I’ve seen a lot of blogs and articles recently about the scrapping of the card transaction fees, and how this is a great win for customers. However, very few people (if any) have looked at it from the point of view of the business owners. Yes, it’s great that the likes of Easyjet can no longer top up their profits by charging that extra 3%, but what about the local taxi firm or any other small business with tight margins?
Last week, it was announced that the UK government will legislate that companies of any size and nature-based within the UK or EU must scrap ALL card transaction fees. These changes will come into force from 13th January 2018.
Many thrifty consumers have been waiting with bated breath for fees to be scrapped, especially when it comes to booking flights and holidays (which have historically had high transaction fees associated with them). Not so small businesses, who use transaction fees to cover costs incurred when providing card payment solutions to their customers.
How will businesses respond?
Most businesses either don’t charge for card transactions and recoup the costs in their pricing or have a minimum spend requirement to help justify the cost of the card transaction.
For businesses that currently DO charge card transaction fees, there aren’t many options going forward other than following the practices used by other businesses outlined above. Any attempt to charge admin fees or rebrand the card transaction fee will result in a breach of the law. Penalties for this have yet to be announced but fines are the most likely route that will be taken.
For some businesses it may be possible to remove card transactions from their portfolio of payment options and instead introduce direct debits, BACs payments and other similar types of payment often attract a much lower transaction rate (BACs payments are free of charge).
With this law coming to force in January 2018, it’s essential that small businesses shop around for alternative card providers rather than just looking at big brands such as Paypal and WorldPay. Making sure you shop around for the best card terminal rates available will soon become as popular as comparing prices for your insurance policies.