U.K. shoppers could see higher prices for European Union purchases due to a planned increase in Mastercard fees, the Financial Times reported on Monday (Jan. 25).
The fee hike won’t benefit Mastercard, but will go to British banks and other card issuers. If companies pass the higher fees onto consumers, shoppers will see prices go up accordingly. Following Brexit, buying and selling across the U.K. and EU changed, as did customs and VAT charges. Cross-channel card fees no longer fall under an EU cap on transaction fees.
The change is expected to take effect starting in October and will increase credit card fees to 1.5 percent of the purchase, up from 0.3 percent. Debit card fees will increase from 0.2 to 1.15 percent. The new fees only affect online purchases and services provided by companies with EU-based operations.
The EU capped interchange fees on behalf of banks in 2015 following complaints about hidden fees and higher prices, per FT, which saved merchants about EUR1.2 billion, and consumers between EUR864 million and EUR1.9 billion. Mastercard told merchants that purchases made between the U.K. and the European Economic Area (EEA) are now considered inter-regional post-Brexit, so the cap no longer applies.
Mastercard has the largest percentage of credit card transactions in Britain; Visa has the most debit card transactions but hasn’t yet announced higher fees. A Visa spokesperson told FT that “Visa would aim to provide our clients with advance notice to help them plan ahead” in the event of fee hikes.
The Bank of England and the U.K. Office for National Statistics reported last week that debit and credit card purchases in the country dropped 35 percent compared to pre-pandemic levels, even though 2020 holiday shopping increased by 4 percent. Since the week of Christmas, spending has once again dropped off.