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Avoid being hit by the Government’s credit card surcharge ban with Cheaper Pay!

As of January 2018, businesses will be stripped of their ability to add any surcharges to their card transactions.

Airlines, fast-food chains and small businesses will be those who suffer most from the ban, but there are ways in which these companies can make up for this potential loss of capital.

Cheaper Pay’s industry-leading payment solutions come in at a staggering 40% cheaper price than the likes of WorldPay, Barclays and Lloyds – offering terrific value for money, as well as bearing the costs that may be lost in profit once these government changes come in to fruition next year.

Having provided UK businesses with the crème de la crème of payment technology for over a decade, Cheaper Pay are well placed to install the ideal payment system that is perfect for your business’s needs.

For a FREE no-obligation quote, get in touch with one of our specialist advisers today on 03301 242 537.

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Card Payments: The Cost Of Staying Static

More and more businesses are realising the potential of adopting card payments as well as cash transactions. With debit and credit cards being used as a consumer’s preferred payment method these days, it’s no wonder that the credit card industry is booming and contactless payments are taking off as much as they are.

However, as a small business, you may be concerned about the cost of having card payments, rather than the additional profit you’ll receive overall. These fears often lead to cash-only payment transactions for many small businesses, until they can accept card payments.

But when taking a look at the overall statistics of card payments, your business is more likely to succeed in the long term than fail.

The Statistics

Roughly, small businesses and SMEs who do not accept card payments are losing out on £8.8bn profit. £52.6 billion is spent by consumers using card payments in the UK with 70% of consumers prefer card to cash. Meanwhile, 32% of UK adults would not purchase from a store that did not accept card payments.

With these alarming statistics from the general UK public, it seems likely that a small business would struggle in it’s first year by not allowing card payments, unless the product was unique enough to suggest otherwise.

The Conclusion

Long term numbers and statistics are more reliable than short-term figures and your fears. Starting a new business comes with all kinds of risks, but being prepared is the most important factor when implementing new systems. Embrace the digital age and now!

Here at CheaperPay we understand the importance of reducing the costs for your new business. This is why we’re offering 3 months FREE when you sign up with us! Contact us for more information.

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EU ban on credit card fees backfires – you’ll still pay 2.5pc to spend

Consumers are still having to pay high fees when using credit cards despite new EU regulations that have capped transaction costs.

At the same time, the rules have resulted in millions of cardholders losing popular perks such as cashback.

As of December 2015, the EU ruled that the “interchange fee” – paid in the first instance by the shop – on credit and debit cards could be no more than 0.3pc and 0.2pc repectively.

Up to then the typical fee was 0.8pc, with shops passing on the cost to customers either through higher prices or explicit credit card usage fees.

The intention of the EU’s new rules was to lower this cost and with the hope that consumers would benefit from lower prices and fees.

But many readers have contacted Telegraph Money confused as to why they continue to pay far more than 0.3pc when using a credit card. Airlines such as Ryanair and Easyjet still add a 2pc charge, for example, and some cinemas charge over 5pc –in the form of fixed-sum “card handling fees”.

The regulations make clear that shops and other sellers of services “must not charge consumers, in respect of a given means of payment, fees that exceed the costs borne by the trader for the use of that means.”

In other words, these fees shouldn’t be used to boost retailers’ profits.

But with some firms charging nothing, and others 2pc or more, that is precisely what Your Moneyreaders, among others, believe is happening.

James Daley, managing director of consumer campaign group Fairer Finance, said: “There doesn’t seem to be anyone policing credit card charges. Nobody is stepping up to these companies and asking them why they apply a 3pc surcharge when others process cards transactions for free.”

According to the Department for Innovation and Skills, unfair surcharges are only looked into when there is a complaint. The first point of call is consumers’ local trading standards office.

Complaints are rare, partly because the sums are often small – but also because the companies that levy the charges are quick to justify them.

The industries that charge

Richard Koch, head of policy at trade body, the UK Cards Association, said the worst offenders are airlines, cinemas and travel agents.

When paying for a flight, customers could expect to pay a 2pc credit card charge with Ryanair. EasyJet applies the same 2pc charge plus a £13 “administration fee” which it adds to all bookings. Flybe and Monarch charge 3pc.

Ryanair told Telegraph Money that the charge reflected the cost of processing credit card payments, including bank fees.

Easyjet took the same line. A spokesman said: “The 2pc transaction fee applied to credit card payments covers all costs associated with processing the transaction of which the bank charge is just an element.

“Other associated costs have increased significantly, particularly in relation to card data security.”

Online travel agents apply charges too. Customers who book a trip through Travel Republic could expect a 1.99pc surcharge if paying by credit card and Thomson applies a 1.5pc fee.

Rail firms and cinemas also charge. Everyman Cinema adds 75p to every ticket booked online.

Even the Government charges taxpayers who pay with credit cards – although here at least theses fees appear to be falling.

Until recently, the government charged a 1.5pc fee for those who wanted to pay tax by credit card. As of April 1, it has been reduced to “better reflect the costs associated with different credit cards.”

When asked about the varying costs, an HMRC spokesman said: “We don’t make a penny from credit card charges. We are merely passing on what we are charged for processing a credit card payment.

“We have introduced and published separate rates to better reflect the costs associated with different credit cards.”

A surcharge is not applied when paying for driving licences and passports. However, the DVLA does add a £2.50 fee to vehicle tax payments by credit card which it says cover the costs of processing the payment.

A number of high-profile firms, such as Trailfinders, do not charge customers for using credit cards.

A Trailfinders spokesman said: “Unlike other travel companies, we don’t charge extra for the use of credit cards or unwanted hidden extras, nor do we charge a premium rate telephone number.”

Sainsbury’s and online marketplace Amazon also do not add on a surcharge.

Homeware retailer IKEA dropped its fee in 2010.

Cashback rewards cut

While the rules appear not to have stopped some firms from levying high card fees, they have had another distinctly negative impact. This is the dramatic decline in cashback and other cardholder perks.

Capital One, one of the biggest credit card providers, was the first to cut its cashback scheme.

It withdrew all of its reward cards in April 2015, saying the EU rules meant they were “no longer sustainable.

A month later, RBS and Natwest announced the end of the “YourPoints” scheme which gave customers one point per £1 spend.

War workers queuing for a midnight show at the cinema. circa 1940

A 75p “card handling fee” applied to your cinema ticket may not seem much – but it could be 5pc of your ticket

 

Tesco Bank* was another provider which slashed its rewards scheme. In November, it announced that customers would need to spend £8 outside of Tesco to earn one Clubcard point, instead of £4 previously.

At the time, a Tesco spokesman said: “As a result of changes in the credit card industry taking affect this year, the amount that card companies earn from businesses who accept credit cards is reducing.”

M&S Bank also cut rewards. Customers were told they would earn one point for every £5 spent from February 2016, instead of the usual £2.

Instead of reducing the cashback, some providers increased the annual credit card fee – Santander’s 123 credit card* went from £2 to £3 a month in January.

Santander suggested the EU commission ruling was part of the decision.

It added: “ The European commission ruling on interchange has significantly reduced the fees banks receive.”

European Commission competition spokesman, Yizhou Ren, said it was too early to judge whether costs borne by consumers would fall.

“It is quite possible that these reductions in interchange fees have not yet been passed on to merchants,” she said.

What to do if you think the surcharge is unfair

If you feel like your credit card costs is unjustified, the first thing to do is to complain to the retailer.

If this doesn’t work, you can complain to your local authority’s trading standards officers.

Another option is to try alternative dispute resolution where an independent party will look at your case to try and help you and the retailer to reach an agreement. According to Citizens Advice, most judges will expect you to try this before taking the matter to court.

 


Murray, A. (2016) EU ban on credit card fees backfires – you’ll still pay 2.5pc to spend. Available at: http://www.telegraph.co.uk/personal-banking/credit-cards/eu-ban-on-creditcard-fees-backfires–youll-still-pay25pc-to-spen/ (Accessed: 7 July 2016).

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50 years on: How credit cards changed our relationship with money

Fifty years ago this week Barclaycard issued the first credit cards in the UK.

Half a century on, consumers are used to a range of convenient ways to pay, but back in 1966 there was a feeling of change when people tried to brandish their exciting new plastic cards.

“When it arrived I didn’t really know what it was,” admits Liz Hodgkinson, who was a fresh-faced 22-year-old just out of university.

The company sent out some 1.25 million plastic cards to Barclays customers from 29 June 1966 and while some sent them back or never used them, many, like Liz, a writer, embraced the new way of paying.

“There was an explanatory letter from Barclays which said it was issuing the cards to its best customers. It was a terrific revolution as far as women were concerned as previously you had to have a male guarantor to get credit.”

Liz Hodgkinson in 1966 and today

Liz Hodgkinson in 1966 and today

At the time, the bank said: “[Barclaycard’s] purpose is to reduce the use of cash in shopping and other transactions and the scheme is designed to appeal not only to those who must travel and spend a good deal of money in restaurants, but also to the everyday shopper throughout the country.”

It also stressed the benefits to retailers and businesses by pointing out that the card would help in “reducing or eliminating the book-keeping now needed to maintain customers’ credit accounts.”

‘Made me feel special’

Once she’d worked out its advantages, Liz used her card as soon as possible.

“I realised that I could buy something without having to pay for it there and then and could have three weeks’ grace. It meant I didn’t have to wait until payday.

“It made me feel very special. My husband banked at Lloyds at the time so didn’t get one.”

In fact it took Barclays’ High Street rivals six years to respond.

Then and now

By the time a group comprising Lloyds, NatWest and Midland (now HSBC) launched the now-scrapped Access card in 1972, there were 1.7 million Barclaycard holders.

Today the company says it has 10.5 million consumer customers as well as many more business customers.

Graphic showing key stats of 50 year anniversary

In the intervening period, the world of plastic cards has changed completely.

In 1966 Barclaycard charged an annual interest rate of 1.5% but expected payment by the end of the month.

The idea of revolving credit, where a card can be used to maintain a longer borrowing, only started in 1967 when Barclaycard offered up to three months’ credit. Now, of course, it’s possible to be in debt to a credit card for a lifetime and the average interest charged on outstanding balances is 18.9%.

The borrowing limits in 1966 were much more modest, too. Cardholders were offered up to £100 worth of credit. Now the average is around £4,000, the company says.

Looking ahead, plastic cards will take over from cash to become the UK’s most frequently used payment method by 2021, reckons Payment UK.

The growth will be driven by “the next generation of account holders”, says the UK Cards Association as “younger people are more likely to embrace new technologies such as contactless cards and mobile payments.”

Barclaycard being sold in 1966

Paying on plastic has come a long way since 1966, with the introduction of debit cards and contactless payment

But the older generation is getting in on the act, too. Liz Hodgkinson, now 72, reveals: “I have an app on my phone to make contactless payments,” although she admits: “It was set up by my grandson!”

Debt warnings

While the introduction of plastic in 1966 may have given cardholders like Liz a feeling of confidence, the evolution of the credit card also meant the danger of getting into debt very much became a reality.

“I was elated to get an Access card when I was aged 18,” says Karen Wake, 55, a pension expert. But her happiness didn’t last. “By the age of 25 I had built up £30,000 worth of debt.

“I worked hard to pay it off in five to six years and have had no debt since then,” she says. “Despite the fact I now work in the financial services industry, that didn’t equip me to manage my finances at a young age.”

Today, many people happily use credit cards for convenience – often earning rewards or cashback – while paying the balance off every month to ensure there are no charges.

But overspending and building up long-term debt remain big problems.

Mike O’Connor, chief executive of the debt charity Step Change, says: “The average credit card debt we see is £8,403 and last year we dealt with more than 200,000 people with £1.7bn of credit card debts.”

He says the Financial Conduct Authority should reform the market to ensure that credit cards work better for consumers, especially those in financial difficulty.

“Small changes to existing rules, such as increasing minimum payments from 1% to 2% of the balance or fixing minimum repayments so that they don’t fall as the balance declines, could save people thousands of pound and cut years off repayment periods,” says Mr O’Connor.

 


Read, S. (2016) 50 years on: How credit cards changed our relationship with money. Available at: http://www.bbc.co.uk/news/business-36518248 (Accessed: 5 July 2016).

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PayPal brings its virtual credit card to the UK with an interest-free offer

PayPal is, in many ways, the primary choice for making online payments. The company is keen to build on this and has launched a new product in the UK to widen its appeal. PayPal Credit is a virtual credit card that can be used online, and as an incentive to sign up, there’s a four-month interest-free offer.

As this is an online credit card, applying for it takes a matter of moments, and PayPal is quick to point out that there’s no hanging around waiting for a card and PIN to arrive. Apply online and you could be approved for a credit extension to your PayPal account.

Just as with any other form of credit card, making an application for PayPal Credit involves a credit check – something to keep in mind if you’re concerned about your credit score. Once signed up, you’ll be able to make purchases via PayPal even if you don’t have funds in your linked bank account, or if you just fancy the idea of spreading the cost of a larger purchase.

PayPal describes the new virtual card: “PayPal Credit is like a credit card you can use for your online purchases, it takes minutes to apply and if you’re approved you’ll have a credit limit in your PayPal account right away.”
The interest-free offer is… interesting. PayPal bills it as “0 per cent for 4 months to use again and again”, going on to explain that “every time you spend £150 or more in one go using PayPal Credit, you’ll get 0 per cent interest for 4 months on that purchase”. After four months – and for purchases over £150 – the interest rate jumps to a fairly standard 17.9 per cent p.a (variable).
If you want to apply for a virtual card, head over to the PayPal Credit website.

 


ITProPortal. 2016. PayPal brings its virtual credit card to the UK with an interest-free offer | ITProPortal.com. [ONLINE] Available at: http://www.itproportal.com/2016/04/15/paypal-brings-virtual-credit-card-to-uk-with-interest-free-offer/. [Accessed 28 April 2016].