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back to article EU asks why credit cards are so expensive

The European Commission is asking for input on better ways to integrate electronic payments across the European Community, and whether today's opaque billing mechanisms can be allowed to continue. The consultation – which talks about card payments but is most concerned with a future where e-payments and m-payments continue to …

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Anonymous Coward

Why credit cards are so expensive?

Because they are issued by banks that like to rip you off.

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It's a profitable business that's why. They have tapped into our desire to buy things with money we've not earned yet.

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not earned yet

Not necessarily. I use credit cards for the convenience of not having to keep my current account balanced every 2 days, and especially for business travel expenses. I'm not spending money I wouldn't be spending otherwise.

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Anonymous Coward

Really?

I don't pay anything for mine, then again I use it rarely and pay it off as soon as possible.

Before I paid it off, it was expensive, but they are offering you an unsecured loan for exactly the amount that you want, when you want it. Then giving you lots of stuff on top like insurance on the goods bought, they'll even fly you back from your holiday if it goes wrong assuming you got it on your CC.

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Really, Really?

That's funny, because I pay everytime I use mine. Visa whack the retailer a fee, and the retailer adds that to my bill. Sometimes the retailer doesn't tell you about it (although it's still there), sometimes they do (cough £7 extra a bloody ticket "cheap" airline!)

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Not always true. I use mine because:

* It comes with free insurance.

* If some miscreant guesses/steals the details it's the CC issuer's money being stolen not mine.

My card is paid off in full by direct debit every month. I don't think I've ever paid a penny in interest in the 25 years I owned one.

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I personally use a check card, it'd not money I borrow but it is money I have in my checking account. It works just like a Visa card.

I do have to wonder why private enterprise is involved with any of this. The US Treasury already spends a ton of money making hard currency, how about they roll out a ubiquitous electronic payment system and stop having merchants pay several percentage points of every transaction to Visa who really contributes nothing to the system.

NOTE: I am against big government, but to me cards are just another form of currency.

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Anonymous Coward

@Bristol Bachelor

Do you think that you don't pay to make payments in cash? That's why in the vast majority of shops you pay the same on debit/credit card or cash. Cash costs money to handle.

As for certain airlines - they've been banned from making ridiculous charges and these were never about card costs anyway.

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"I use it rarely and pay it off as soon as possible"

As indeed do I by variable DD with the exception that I use it as much as possible because the CC company gives cash-back - OK only £75 or 0.5% of all the spend but it's in the right direction

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I'd never risk a 'check card' - called a 'debit card' in the UK. The problem with them is that if they are compromised the money gets taken out of your account so you have to claim it back. With a CC you just tell the issuer which transactions are fraudulent and you never actually lose the money in the first place.

Someone else has mentioned the cost of CCs but in the UK at least there's rarely a fee for them and most retailers charge the same for CC as they do for cash or any other form of payment. If they are including a CC handling charge in the price then everyone is paying it.

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Over here, a debit card has a PIN and works at an ATM. The check card is issued by Visa, takes a signature, and does not work as an ATM card for my account. It also has all the credit card protections.

I wouldn't have one on an account with thousands of dollars in it, but for my own meager portion of my paycheck it suits my purposes just fine.

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Anonymous Coward

Lobbying

It's worse in my pine-tree-abundant US state: the retailer is not even allowed to charge a transaction fee. Protecting the poor from exploitation, apparently. Because of that, there's the odd value-driven business that doesn't even accept credit cards, although one recently caved in.

I'm caught between Scylla and Charybdis.* I can take a principled stand and not let them suck my money out of the state or I can use my cashback cards and get a chunk back.

* OK, maybe not. It's more of a white person's problem**.

** With regards to Lewis CK.

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Anonymous Coward

Bureaucracy

But surely the cumbersome, bureaucratic government system would be much more expensive and worse than the service provided by those private businesses?

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No competition

As with so many other quasi-monopolies - rail travel, gas, electricity, broadband, TV, and of course PC operating systems and office suites - consumers actually have little or no choice. The mechanism whereby they are supposed to be able to drive down prices by choosing the cheapest option is entirely absent from the credit card market, because all the negotiation takes place between banks and merchants. (Not that the merchants have any choice either, other than "take it" or "leave it").

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FAIL

Bollocks

"A card, or more likely a phone, might carry the Visa logo but have multiple accounts held on it and the retailer might have a distinct (and financially motivated) preference for a particular account, so the EC wants to know if they should be allowed to select it automatically."

Ive just checked my wallet, and there are 3 credit cards and 4 debit cards in there. I dont doubt that they all have different rates for the retailer, but do I put them on the counter now and say "Take your pick" ? Do I bollocks. And I wont in the future either.

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Still a mess for visitors to UK/EU

Try using a foreign-issued Visa card in a high street shop that doesn't know how to process transactions without chip-and-pin! Even though the Chip and Pin implementation specifically instructs retailers to have a system for people with older-style cards and for tourists and business travellers who will not have compatible cards, the odds are that the cashier will not allow your card.

I love the European tollways that don't accept non-EU issued VISA cards - great for travellers in rental cars who get to the end of a 300km stretch of road and find that none of their cards are accepted on that stretch of road. The human attendants can't even manually process them .

[Written with 6 years of experience of this in the UK and EU]

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That's too bad really

Chip and PIN is the default in Europe so is it surprising that many places are increasingly unprepared for a card which doesn't have one? But most will read a magnetic stripe card as a fallback. It's also fairly easy to obtain some form of chip & pin debit card (e.g. in the UK you can get a Travel Money Card from the Post Office) and load it up with money.

As for toll roads, I doubt many people even Europeans pay with a credit card unless they are completely stuck. Most will pay with cash or have some kind of fast pass token on their car so they get a statement at the end of the month. Is it hard to carry cash?

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Re: [Written with 6 years of experience of this in the UK and EU]

Do the toll barriers not accept cash?

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I would expect toll barriers to promote the use of cash rather than cards because transaction time is a lot less.

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[quote]Try using a foreign-issued Visa card in a high street shop that doesn't know how to process transactions without chip-and-pin! Even though the Chip and Pin implementation specifically instructs retailers to have a system for people with older-style cards and for tourists and business travellers who will not have compatible cards, the odds are that the cashier will not allow your card.

I love the European tollways that don't accept non-EU issued VISA cards - great for travellers in rental cars who get to the end of a 300km stretch of road and find that none of their cards are accepted on that stretch of road. The human attendants can't even manually process them .

[Written with 6 years of experience of this in the UK and EU][/quote]

So, get a chip and pin card and your problems are solved. Just because your (and I assume you are from the US as most other developed countries have moved or are currently moving to chip and PIN) bank issues a shitty and insecure product dont go blaming the EU for it. As a merchant I think i would try to avoid taking any kind of magstripe product because I realise just how insecure they are and dont want the hassle of a chargeback either.

Canadian, Brazilian, Australian, South African issued chip and pin cards work just in the EU.

Good news for you there are some issuers in the US that have actually realised that travel experience is very poor so have switched to chip and pin.

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@James Micallef

That is probably because you have only come across the ones at Dartford or to escape Wales,with charges like £1. When you go through ones with charges like €80, a card becomes a lot faster (especially the unmanned ones that like to chew up banknotes)

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"As for toll roads"

Paying French motorway tolls is MUCH faster with a card, most people seem to be in the long queue for cash. No PIN needed just card in/out

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Happy

We had one of our US bosses visit us just before Christmas and he took us out for several meals. None of the pubs or restaurants batted an eyelid. They just swiped the card in the reader and got him to sign the receipt. Maybe they are just more used to it than shops.

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The hell it's quicker!

Or..not on the M6 Toll. I pay by CC there and no sooner have you pushed your card into the slot then it's being pushed back out again. Probably takes less than a second. No need for a PIN and I think it'd take at least as long for cash to bounce around the basket then drop through and be counted.

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Or try using a UK issued Chip and Sign card, and see how many places don't know how to take them, even with the terminal/ePoS putting the instructions on the screen.

Often it comes back as the till taking it, but the person telling me they can't take it because it doesn't have a PIN...

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Completely the opposite.

The highway operators prefer credit cards every time.

No cashier, no securicor van to pick up the 10 kilos of coins, no messing about with change .... no brainer.

The point missed by the EU and a lot of posters is that for the retailer cash is expensive and inconvenient. Consider all the extra work and expense:-

-- you need to keep a till full of notes and coins so you give change to all those shoppers with twenty pound note straight from the cash machine.

-- You need to pay someone to take your takings to the bank.

-- You need to spend hours at the bank counting notes and coins .

-- You become an obvious target for thieves so you require more insurance and need to spend more on security.

-- Worse you become a target for the Inland Revenue and the VAT who never believe anyone where wodges of folding are concerned.

The retailers accept high CC charges because a) its still cheaper than dealing with coins and notes, and, b) turnover increases as they don't lose out on punters whose impulse to buy coincides with empty pockets

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Given that the UK implementation of Chip and Pin was less secure than anywhere else, that's not so practical. And no I'm not from the US although I lived there.

Australian chip and pin does NOT work in EU.

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You're kidding?! Cards are very quick - much faster than people finding and feeding coins and notes through the system.

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Facepalm

If you have the correct currency. It's possible to get from the Channel almost across France to Switzerland without encountering the need for cash otherwise because the closer tollways aren't limited. I did a 20 country road trip and found that the currency changed every second country (generally alternating with Euro) and you're not always able to get cash before hitting the tollway, and you won't know if you need it till the end of the tollway.

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WTF?

I should add that for tollways and other places, it's nothing to do with Chip and Pin - it's that the tolls and stores won't accept Visa cards etc that weren't issued by a bank in the EU.

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"In the UK you can get a Travel Money Card from the Post Office" - if you're a UK resident.

I tried one of the Travelex cards but that was totally useless as no one would accept them - not even at Heathrow. In fact the Travelex ATMs would accept Visa cards but not their own Travelex cards.

Plus Travelex will only issue with a single card denominated in one currency. You can get a GBP card for the UK *or* a Euro card for elsewhere but you can't have both. The cards can only be used in the currency zone they apply to.

"As for toll roads, I doubt many people even Europeans pay with a credit card unless they are completely stuck. Most will pay with cash or have some kind of fast pass token on their car so they get a statement at the end of the month. Is it hard to carry cash?"

I rarely see people using the fast pass lanes, and you need a LOT of cash to get around in some countries road toll systems. If you're crossing borders then you may not have all the right currency types (euro, kroner, swiss francs, ... )

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Holmes

"The consultation – asks for feedback on how to encourage payment companies to reduce their rates while increasing the security of payments"

(1) Take their licences to operate away from them if they don't drop their costs.

(2) Make the institutions liable for all fraudulent use of a card*

The financial institutions need an incentive to do this, at the moment they have all the advantages and the card owner has all the disadvantages, it should be the other way round. Oh, and the EU/governments need to grow a pair as well.

* before anyone makes a post about defrauding the bank by using my card and then ringing up the back to say it's been stolen 20 minutes later, I mean genuine cases of fraud, e.g. where your card is used in two locations at the same time.

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Anonymous Coward

@Fieldmarshal

2 was put into law about two years ago. All burden of proof on the bank, use of a PIN is not proof as it could have been shoulder surfed.

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Unhappy

3D Secure

is a new 'feature' on many cards: basically a few marginally effective security measures, but if a card is enrolled in the program (many banks enroll new cards by default, and some sites force customers to enroll in order to buy), the bank can brush off responsibility for any fraudulent transactions onto the customer.

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Anonymous Coward

@Gabor

No, not really, the bank has to *prove* it was the customer, the details could be used by man-in-the-middle attacks on internet shopping.

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No, that's the point: burden of proof is shifted to the customer.

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Really?

Can you quote the law? Is this UK, EU or what? My understanding has been that if the correct PIN is used in a fraudulent transaction the bank washes its hands of the the problem, which is a major reason why I don't use chip and PIN cards, as the system is inherently insecure and has no protection for the cardholder.

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It's the internal SOP guidelines of the CC companies (search for '3D Secure liability shift').

If you get phished, you're likely stuck with the charges, unless you can afford to appeal to Visa's own Court in London (they charge for lodging a complaint, and go from there).

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Anonymous Coward

@People

Why would you complain to Visa about a contested payment on your card? They are issued by Visa, but operated by your bank - you complain to the bank and if you don't get satisfaction from them, the FSA.

The law in question is the Financial Services Authority (FSA) Payment Services Regulations 2009 which came into force on 1 November 2009. The FSA said about the law:

"It is for the bank, building society or credit card company to show that the transaction was made by you, and there was no breakdown in procedures or technical difficulty"

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Dutch trains

really annoying that you cant use UK issued bank cards on the Dutch train system ticket machines or at some stations ticket offices.

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Meh

Always?

I have not had a problem using my UK debit card buying Dutch train tickets before... seems to not like my credit card though...

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It’s much more fun than that. I had a company issued visa card for business expenses, and while you can quite happy use it to purchase ticket at Schiphol , try doing the same thing on a return journey. you can't as you find all the station outside of Amsterdam don't take visa, cash or their own pre-pay only. Crazy, why only allow it at one station?

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Anonymous Coward

Err...

I've seen similar in Belgium (Brussels), it turns out that you can't use a standard card on the ticket machines, but you can in the ticket office.

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Two different machines

As far as I know there are two models of train ticket machines in The Netherlands, one type does not accept creditcards, only debit cards, the other type does accept creditcards. The machines only taking debit cards are more widely available. This is largely not a problem as people in NL are more likely to use a debit card than a credit card (only a minority has a credit card here).

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You can't use any non-German cards in a lot of Germany now. It's either local debit cards or cash. If you need to replace some computer or photographic equipment when travelling then your daily withdrawal limit may not suffice.

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They're expensive because

National and EU governments let credit card companies get away with it.

At least it's not as bad as the US though where there are, believe it or not, cards with 80% interest

http://money.cnn.com/2011/02/07/pf/credit_card_interest_rate/index.htm

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in the US

At least in the US Visa & MasterCard are allowed to stipulate in their merchant agreements that retailers can NOT surcharge credit card purchases. The rip-off charges prominent in the UK are caused by law that prohibits Visa & MC from prohibiting them!

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Well that's changing soon

The EU is cracking down on the likes of Ryanair who do it. They'll have to invent imaginative new ways to pretend their flights cost 1p when by the time of checkout it's closer to £50 due to all the fees and charges they've concocted.

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Easy to get around...

Every retailer who cares to keep up with it just gives a "cash discount". As long as the posted price is the credit price or the credit price is posted first, it's a perfectly acceptable alternative to visa/mc.

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Anonymous Coward

"the retailer might have a distinct (and financially motivated) preference for a particular account, so the EC wants to know if they should be allowed to select it automatically"

As the purchaser, it is my choice to decide which method from the methods offered by the seller. To consider something else is a sign of folly.

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