Card interchange fees – how will the new cap affect you?
Understand how the cap on credit and debit card interchange fees could affect your current card.
Last month, the EU voted to cap credit and debit card interchange fees with the hope of saving consumers and merchants around 6 billion Euros a year. However, the worry is that the retailers will simply keep the savings created by the cap instead of passing some of them on onto all of us.
The interchange fee is what the credit and debit card companies charge the retailers every time you pay with your card. The fee is a percentage of the transaction and it can be as high as 1.5%. As credit card companies make money every time their customer uses their card, they encourage spending by offering such perks as cashback, points and air miles. However, the cap on the card interchange fees will mean that credit and debit card companies make less money on transactions, with the cap at a significantly lower 0.5% and 0.3% respectively.
With this announcement, many of the credit card providers are withdrawing their rewards and cashback features as keeping them would make the cards less profitable. This means that your current card might not be the best option out there after the changes have been implemented. Keep an eye on the changes that your credit card company is making and if you decide that you can get a better deal somewhere else, make sure your credit score and report are ready for the switch. If your credit score and report don’t reflect your current financial behaviour when you decide to apply for a new credit card, you might be rejected or get charged higher interest, which will lower your credit score further and make it even harder to have an application accepted.
Being aware of your credit history will make it easier for you to get the best out of the financial services. Looking after your credit score and report will mean that you have more options available to you and you could be offered better rates on loans. ClearScore is here to provide a free credit score and report to everyone in the UK because we believe that everyone should be able to see this information for free.