The European Parliament has agreed a compromise deal with the Council on a regulation capping interchange fees for card-based payments. It is hoped the regulation will also help users make more informed choices about payment instruments.
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Interchange fees are the fees charged by a card holder’s bank to a retailer’s bank every time a consumer makes a card-based purchase.
Consumers are often unaware of interchange fees. But these cost retailers and ultimately consumers tens of billions of euros every year.
The level of the interchange fees varies widely between the EU Member States, and they are seen as creating barriers to the internal market.
Capping interchange fees will reduce costs for retailers and consumers and help create an EU-wide payments market.
Caps for debit and credit cards
Under the compromise agreed with the Parliament, the following maximum levels for interchange fees will apply as from 6 months after entry into force of the regulation:
- For all credit card transactions, 0.3% of the value of the transaction.
- For all debit card transactions, 0.2% of the value of the transaction. However, for domestic debit card transactions, member states may allow a per transaction interchange fee of no more than 5 eurocents in combination with the 0.2% cap. They can do this provided that the sum of interchange fees of the payment card scheme does not exceed 0.2% of the annual transaction value of domestic debit card transactions within each payment card scheme. Moreover, during the first five years of application, member states may apply the 0.2% cap calculated as an annual weighted average of all domestic debit card transactions within each payment card scheme.
- For domestic payment transactions that are not distinguishable as debit or credit card transactions (“universal cards” transactions), the same cap as that provided for domestic debit cards transactions. However, during the first year of application of the caps, member states may define up to 30% of the domestic “universal cards” transactions as credit card transactions to which the interchange fee cap of 0.3% of the value of the transaction would apply.
Transparency
The new rules are aimed at encouraging competition and facilitating new entrants in joining the market, leading to broader availability of payment instruments.
They will ensure transparent mechanisms allowing retailers to be aware of the level of fees paid when accepting cards. The new rules will also enhance the possibility retailers have to select which payment cards to accept.
Card schemes often try to convince banks to issue their cards by letting banks charge higher fees. Retailers pass on their costs for accepting card payments to their customers by raising prices. In certain payment card schemes, which are associations of banks, these fees are multilaterally agreed by member banks.
Next steps
The compromise between the presidency of the Council and the Parliament was reached on 17 December 2014 and will enable adoption of the legislation in first reading. The Council had set out its position in November 2014.
The regulation will now have to be approved by the Parliament, so as to allow final adoption by the Council once the text has been revised in all languages.
Text of the draft regulation on interchange fees for card-based payment transactions
