EU plans to curb costs of paying with plastic

Airlines will no longer be able to charge consumers extra for booking flights online while the price of goods in shops should fall as the EU moved to curb the costs of paying with plastic.

The changes are part of a raft of rules unveiled by the European Commission designed to make it easier to pay online and across borders using credit and debit cards.

However, the bad news is that the individual cost banks charge every time a card is used will not change.

The long-awaited proposals were welcomed by most consumer groups and retailers across the EU, who said it would save shoppers €750m while cutting costs to the big multinational merchants by €3bn a year.

BEUC, the EU’s largest consumer body, said they were particularly pleased with a ban on the many surcharges consumers are currently forced to accept when making a card payment online.

Many low cost and other airlines such as Ryanair and Aer Lingus charge as much as €12 for using a debit or credit card to pay online when in fact the traveller has no other alternative way to pay.

Under the rules, cardholders will be liable for no more than the first €50 spent if their card is stolen or skimmed, down from the current limit of €150.

Consumers will also be able to ask their banks to refund payments made for goods and services that were not provided as contracted.

A cap on interchange fees for retailers is also to be introduced, which they must pay every time they accept a card for a purchase, part of which goes to the bank that issued the card and part to the bank processing the deal.

These fees will be capped at 0.3% for credit cards and 0.2% for debit card transactions. Debit cards are more popular in Ireland than credit cards but because of the high cost of using them the usage is relatively low, with 76 transactions per person a year in 2011.

This cap would apply immediately once the proposals become law for cross-EU border payments and come into force for all transactions within the EU 22 months later.

However, not everyone agrees that the proposed new rules will cut the cost of goods to consumers, with consumer bodies from Lithuania and Estonia agreeing with MasterCard that it could hike prices instead.

However, the European Commission refuted this, saying that in Denmark, where there is zero mark up on debit cards, it has one of the highest usages of them in the EU.

Commissioner Joaquin Almunia said: “I am aware that there are vested interests which have been fighting the idea of limiting interchange fees, trying to scare consumers that the impact of the regulation would be higher cardholder fees and no decrease in retail prices.

“However, there is every reason to believe that consumers will benefit from the disappearance of a hidden cost on their bills, since retailers compete on transparent retail prices.”

On the other hand, commercial cards such as American Express and Diners Club Cards, which account for 5% of the market, are not covered by the rules, but retailers may add a surcharge for accepting them.

Non-card internet payment services will be regulated for the first time increasing their safety.

These have been introduced in a number of EU countries and operate in a similar way to Paypal, although it will not apply to Paypal because it charges differently.