British customers will be hit with charges on new debit and credit cards if a proposed European Union rule is allowed to come into force, a report warns.
The rule is supposed to clamp down on the fees taken every time a transaction is made using cards with losses ultimately being passed on to consumers.
That could mean a fee of £11 for every new debit card, and as much as £25 for credit cards, as the international companies look to cover estimated losses of £2.4 billion.
Mastercard commissioned research by consultancy firm Europe Economics, who worked with academics at the University of Essex to tally up how much the new regulations could cost the firms who impose transaction fees.
They also found that interest rates and card fees rose when similar changes were made in Australia and Spain in 2003 and 2005.
Despite Mastercard’s objections, the UK Office of Fair Trading has supported the European Commission, which believes the so-called “interchange fees” charged to both customers and retailers are in violation of legal and ethical rulings on transparency.
While the EU rule change would impact the whole of Europe, the issue is particularly sensitive in the UK because it would see an end to the tradition of “free banking”. Most other countries see basic fees imposed on accounts, with banks instead preferring to charge less for overdraft fees and penalties.
Attempts to ban interchange fees have long been on the European Commission’s agenda, and lobbying retailers have campaigned against them with the www.stopunfaircardfees.eu website.
Mastercard, which has a net annual income of around £1.9 billion, said that while it estimated large retailers would benefit by as much as £2.2 billion, there was "no evidence that these savings are passed on to the consumer in lower prices".
As a result, they say British banks will have to start charging customers for the privilege of using their cards.Reuse content