Mastercard is to impose a five-fold increase on the fees it charges EU merchants when UK cardholders shop with them online. The new fees, which Mastercard attributes to the UK’s decision to leave the EU, will come into effect on 15 October 2021.
Understandably, the move has triggered concerns that retailers could hike prices for UK consumers who shop abroad.
Here is some more information on this developing story.
What are the new Mastercard fees?
Whenever you use your credit card or debit card to pay for something, a small percentage of the purchase price is paid by the retailer to the bank that issued the card as an interchange fee. This fee is set by a payments firm such as Mastercard.
At the moment, Mastercard has an interchange fee of 0.3% on credit card payments and 0.2% on debit card payments. These will increase to 1.5% and 1.15% respectively.
The new charges are only for online transactions and won’t apply to in-store transactions.
How will the new Mastercard fees affect consumers?
Mastercard has said that in practice, consumers should not feel any impact from the changes.
Still, there’s a possibility that EU retailers could decide to pass on these costs to UK shoppers, translating to an increase in prices for goods and services. This will add to charges already imposed due to Brexit’s red tape (including customs duties, VAT and handling fees).
The BBC says that the new Mastercard changes are coming at a time when retailers increasingly face extra paperwork and checks and potentially higher costs for goods coming into the UK.
And this is all on top of the Covid-19 restrictions that have already presented many other challenges to businesses.
Industries such as hotels, airlines, travel groups and car rentals have taken a huge hit from the pandemic. Companies in these sectors could be compelled to pass on Mastercard’s extra charges to consumers.
That being said, nothing is confirmed yet.
The new charges don’t come into effect until later this year. So there’s still time for EU companies to look for ways of reclassifying sales to the UK to avoid the charges.
But we’ll have to wait and see.
What about Visa?
Visa, Mastercard’s main rival, has not announced any plans to adjust its fees. At the same time, it has not ruled out such a move.
It released a statement saying that if it were to introduce new interchange fees, the company would provide its clients with advance notice of at least six months to help them plan ahead.
Saving money with the right credit card
While we hope that Mastercard’s changes won’t lead to a hiking of consumer prices, it’s still good to be prepared. That means finding ways to cut costs and make savings when spending on foreign websites.
Many shoppers are actually unaware that paying for purchases by card on a foreign website and in foreign currency comes with extra fees (up to 3%).
The good news is that specialist credit cards, such as travel credit cards, don’t charge these extra fees. This makes them more than ideal for shopping on foreign websites, or even for use when travelling or holidaying abroad.
So, if you regularly use your credit card to order items from abroad, or often travel abroad, a travel credit card could lead to big savings in foreign transaction fees.
To find the one that’s best for your needs, take a look at our selection of the best travel credit cards.
