Replacing Credit Card fee with a Service charge

[Nico Albrecht]

I was wondering what the legal point is to replace the banned credit card fees with a service charge. I noticed that Just Eat replaced their 50p credit card fee with a 50p service charge recently and it makes me wonder if it could be that easy to work around it. For us charging a surcharge for credit card payments was never really a problem in b2b and customers where happy to pay the actual cost to us. Since cost range from a couple cents to the most expensive one " Amex " We do B2b most of the time and they get 30 days payment terms and pay by bacs anyway but for convenience I have an iZettle payment terminal on site for convenience and B2C customers. Since it uses an app and I need to pair it to my mobile phone to process a transaction I was wondering if I can charge a " service charge " for it. On small transaction 3% doesn't seem much but out average job cost £300 + VAT and if somebody pays with a business credit card or amax it cost me 2.75%. Any input is welcome and not a big problem at the moment.

 

[Newchodge]

If you only charge the 'service charge' to credit card users, all you have done is change the name, so you can't. If you apply the service charge to all customers then that is fine.

 

[Nico Albrecht]

I tried to look up the legal definition of a service charge and mostly i only found it in regards to leases. It is not very clear to be honest. Since I provide a facility ( card reader ) and i have to enter data I provide a service which I do not need if a customers pay cash. I am not arguing that cash handling is more expensive by the end of the day. On an ecommerce website the facility ( online payment gateway) is always in place but since I need hardware on site I was wondering if I can get away with a service charge.

 

[TotalWebSolutions]

If you charge a 'Service Charge', 'Handling Fee', 'Booking Fee' for all online orders (regardless of Credit or Debit) then there is probably not much anyone can do about it from a legal standpoint but obviously the client has the option of whether they wish to proceed with a transaction as a result.

You could argue that you include other overheads into the selling price so why not card processing. The problem is when companies are charging way over the odds of what they themselves are charged by their payment processor/acquirer.

 

[Chris Ashdown]

Why not just include a average cost onto your selling price or absorb it, Its just another cost of running a business, presumably you don't charge for use of the phone or packaging just delivery

 

[Newchodge]

there is probably not much anyone can do about it from a legal standpoint

Well, except notify trading standards that you are breaking the law and take you to the small claims court for redress.

 

[Newchodge]

Edit: Dupicate

 

[TotalWebSolutions]

Well, except notify trading standards that you are breaking the law and take you to the small claims court for redress.

How is this breaking the law if it is applied to all orders regardless of card/payment type? As with the Just Eat scenario it is applied across all orders. In fact, you have said above that it is fine to do...

 

[Mr D]

How is this breaking the law if it is applied to all orders regardless of card/payment type? As with the Just Eat scenario it is applied across all orders. In fact, you have said above that it is fine to do...

And it will cost the company some customers.
If they had simply included it in the item prices then may have got away with it as a planned price rise.

 

[Newchodge]

How is this breaking the law if it is applied to all orders regardless of card/payment type?

If it is charged only for payment by card of any type it is illegal. If it is charged for every transaction it is legal.

 

[TotalWebSolutions]

If it is charged only for payment by card of any type it is illegal. If it is charged for every transaction it is legal.

So if it is not stated as a card processing fee but as a 'Service Charge', 'Handling Fee', 'Booking Fee' etc and you only take card payments as a payment method then it is illegal ??

 

[Newchodge]

So if it is not stated as a card processing fee but as a 'Service Charge', 'Handling Fee', 'Booking Fee' etc and you only take card payments as a payment method then it is illegal ??

If you charge the same service charge, handling fee, booking fee for every type of transactiojn it is legal. You cannot charge differentially because of the payment type. However the guidance here https://www.gov.uk/government/uploa...a/file/664065/payment-surcharges-guidance.pdf
is mud-like, and I haven't looled at the regulations yet.

 

[TotalWebSolutions]

If you charge the same service charge, handling fee, booking fee for every type of transactiojn it is legal. You cannot charge differentially because of the payment type.

Yes. That is what I was pointing out. If your only payment method is card then it becomes a very grey area. I am not saying I agree or disagree with a business adding the charge. Just where it becomes illegal/grey.

 

[fisicx]

I don't think it's grey at all. When I got out for a meal they add a 10% service charge. This applies no matter how I pay.

If the takeaway is going to add a 50p service charge and I walk into the takeaway and pay cash I still have to pay the service charge.

The service charge applies to every transaction or none of them.

 

[TotalWebSolutions]

I don't think it's grey at all. .

I'm saying it is grey if you only take cards as a payment method but have it as a service charge (i.e. relating to the whole order/booking process). Ticketmaster state that their processing fee covers all aspects of the booking (not just payment).

 

[smallclaimsassistance]

Why not just include a average cost onto your selling price or absorb it, Its just another cost of running a business, presumably you don't charge for use of the phone or packaging just delivery

^

 

[Chris Ashdown]

Fisicx
Sorry but never paid a service charge for a meal in my life, if its on the menu I ask if its voluntary if yes I order and don't pay the service charge if not voluntary i walk to another restaurant

I don't pay for service i just expect it if they want my custom

 

[Mr D]

Fisicx
Sorry but never paid a service charge for a meal in my life, if its on the menu I ask if its voluntary if yes I order and don't pay the service charge if not voluntary i walk to another restaurant

I don't pay for service i just expect it if they want my custom

A number of places that have a service charge also expect tips. Service charge can include kitchen staff work, wait staff, cleaning, tablecloths and anything else the business wants to add on.
For most of us businesspeople that sort of thing is included in the price as a cost of the business.

Service charge is a business income and is taxed as per the business taxes. It does not belong to the staff.
A tip however belongs to the staff. I prefer tipping the staff, having done kitchen portering.

 

[fisicx]

Sorry but never paid a service charge for a meal in my life

My point was to highlight that the charge applies to all transactions, not just those paid with a card. And you probably do pay a service charge, they just include it in the price rather than add it on at the end.

 

[SteveHa]

You complain about the handling fee on business credit card payments. The ban on passing costs on only applies to personal credit cards, not to business cards.

 

[Mark-D18]

If you use izettle the charges are quite high at 1.75%. Although the regulations state card companies cannot charge more than 0.3%, there must be a way round it.
For small businesses using izettle, or the higher charges paypal, ca you say the payment is taken by a third party and have a service charge for using the third party services?
(If anyone has a better offering than 1.75% from izettle for very small business (less than 30k pa), I'd love to hear about)

 

[Mark-D18]

I just checked regulations carefully. If you use something like izettle or paypal these are classed as a retail e-money payment and not affected by the new law. You are allowed to make charges for e-money payments. See sect 5.2
goto the gov website (I can't paste links yet on here) gov.uk
/government/uploads/system/uploads/attachment_data/file/664065/payment-surcharges-guidance.pdf

 

[Mr D]

I just checked regulations carefully. If you use something like izettle or paypal these are classed as a retail e-money payment and not affected by the new law. You are allowed to make charges for e-money payments. See sect 5.2
goto the gov website (I can't paste links yet on here) gov.uk
/government/uploads/system/uploads/attachment_data/file/664065/payment-surcharges-guidance.pdf

Do the paying public know that?

 

[Mark-D18]

I'm sure they don't. However, any awkward customer can be directed to the gov.uk pdf.

 

[Mr D]

I'm sure they don't. However, any awkward customer can be directed to the gov.uk pdf.

Leading to annoyed customers.
Cannot see the sense in it when the solution for all the other costs is different from that one.
Think I prefer happy customers.

 

[Mark-D18]

I have a small group of clients, no one has complained.
Can I ask which service you use and how much they charge?

 

[Newchodge]

I'm sure they don't. However, any awkward customer can be directed to the gov.uk pdf.

On their way out to find a better provider.

 

[Mark-D18]

How condescending of you. Good job I'm not one of your clients, because I'd be walking away from Hodgson Employer Services right now.
We have a very good relationship with our clients, and not a single one has complained, and we continue to work with them all whilst making the small charge.

 

[Newchodge]

We have a very good relationship with our clients, and not a single one has complained

You do realise that the law only changed 2 weeks ago?