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Card processing fees to be capped.




News according to the BBC is that European Parliament is planning to implement reforms that will place a cap on how much Card Schemes charge for processing card payments.


Using our debit/credit card to pay for goods and services to a number us is a very simple and straight forward process (Put your card in, enter pin and... payment accepted.)


The Reality is that a lot of administrative work go on behind the scene and someone has to bear the cost of making this happen hence the fees. 

At the moment Visa and MasterCard charge business owners a fee (which is passed on to us) for  processing card payments on behalf of their customers.


It takes five steps to actually process a card payment


1. Card-holder slots card into retailer's chip and pin device and enter pin.

2. Retailer transmit card details through the telephone line attached to it's chip and pin device to an acquirer.

3. Acquirer (The company responsible for processing card details, which could involve request for further information) passes on the card holder's processed details to the Card scheme.

4. Card scheme mainly MasterCard and Visa ( owners of the payment scheme that eligible financial institutions subscribe to so they can issue cards ) are responsible for the operation and clearing of card payments so they pass on release of funds request to the the card issuers.

5. Card Issuer which is your bank or building society makes payment for whatever you have purchased by debiting your account with them. PHEW!!!

The plan of the European parliament at the moment is to implement reforms that will place a cap on the fees charged at 0.2 percent for debit cards as opposed to the current 8p per transaction (although not every debit card transaction carry a fee as it sometimes depend on where you use your card). Credit cards to be capped at 0.3 percent as opposed to the current 0.8 percent charged for completing this process. 

This could be big news for us because although using a card for payment is a matter of choice we however choose to use our cards because of the convenience it offers and sometimes it even becomes a necessity as it allows us make purchase without actually being physically present.


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