2018-01-09

Discount for cash! No!

OK I hate doing new blogs like this to make a point. However, I really want to make it simple.

Making cash and card the same does not mean card is cheaper, it can mean cash is more expensive!

Previously

A seller could charge a fee for payments by different methods. They had different costs for card (depending on card type) or cash (that has a cost in many cases) or bank payment by different means, and could choose to charge a fee depending on the cost to that seller handling that payment method.

That is fair!

It means the seller is covering the cost that depends on the buyers choice. Simple.

This did not help the seller, they simply allowed the buyer to choose a means that reduced costs by choice of payment method, and benefitted the buyer as a result.

Now (from 13th Jan)

The seller cannot charge a fee depending on payment method in most cases.

But the seller still has costs, and this change means the seller may have increased costs as people can choose to pay by more expensive means at no cost difference to them.

The seller still has to cover those costs somehow. Yes, they are "the cost of doing business", but they are now costs that cannot be added to the bill, so have to be in the overall costs somehow. They mean a change in price or a "service charge".

Everyone pays the same!

This is the key thing, and the whole point and spirit of the change of the legislation.

It does not matter if Just Eat charge a service charge or charge the restaurant - the latter means prices for everyone goes up to cover it, not just those using Just Eat. So worse in many ways.

The key change, and the whole point of the change, is that you can no longer have something cheaper by your choice of a cheaper payment method. That is the point.

I really do not understand why people do not immediately look at the converse. A discount for X is a surcharge for not-X. Remove a charge for Y and it is a charge for all not just for Y.

Not cheaper!

Nothing in the legislative changes expects or requires that costs to the consumer are cheaper in some way. Remember that! The whole point is to make it the same regardless of payment method, so those choosing to pay by a cheaper method do not get any discount. That is the point of the law.

The spirit of the law is the same charge for everyone, so Just Eat changing from a charge for "card payers" to a service charge for "all", that is the whole point and spirit of the change in the law.

Discount for cash? No!

Pay by cash, and get a discount, that is how it was, and that is what this legislative change outlaws. Why did you think it was otherwise? Why was this any surprise to anyone?

12 comments:

  1. Hopefully this will give merchants as a whole an incentive to try to argue down Visa and MasterCard's horribly high fees. (They haven't really had an incentive before now because they could just pass the cost on directly.)

    I mean it's not as if the transaction *actually* costs Visa or MasterCard remotely as much as they charge the merchants. They just have far more pricing power than any individual merchant.

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  2. Perhaps the goal is to get more consumers to turn on traders offering 20% discount for cash.

    Although I doubt it will be illegal to accept the offer, it's a bit more leverage that HMRC might have.

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  3. There are cafes in Melbourne that don’t accept cash due to the additional costs of cash...

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    Replies
    1. Sweden is mostly cashless, and many places there won't take cash. It's all chip and pin (which is a pain for US tourists where chip and pin cards are rare).

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  4. The funny thing about using Just Eat as an example is that they are actually double dipping. They're charging the restaurant at least 13% [a] commission, and they're also charging the customer the 50p "service charge". The truth is very few services are priced in relation to their actual cost to the provider, they're priced by what people and businesses are willing to pay.

    [a] https://www.theguardian.com/business/2016/may/03/just-eat-delivers-profit-restaurant-commission-online-takeaway

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    Replies
    1. Indeed, but not a hugely unexpected consequence of the change in the law is it...

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    2. They also charge around £1000 sign up fee, monthly subscription fee then admin. VAT on every order alongside the commission plus still charging card processing to restaurants which they always have done. Restaurants have no option to accept card payments & if you get too many cash orders just eat will block cash options to ensure funds to cover their chunk

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  5. The Payments Services Directive (PSD II) seems to be well intentioned but did Which really think companies would just absorb the charge? Now we have no choice whether to pay a surcharge or not and the level the card companies charge is hidden so there's no incentive to bring it down. Seems bonkers to me!

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  6. The unintended consequences of the legislation have started. An auction house in Derby is now accepting debit cards or cash only. Credit card payments not allowed.

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    Replies
    1. Possibly unintended but far from unexpected - surely law makers realised this?

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    2. Lawmakers don't realise a lot of things. I used to work in the Civil Service until I retired and got away from the lunatic asylum which is Government Policy (of any political shade by the way). I would love to tell you more but I am forever constrained by the Official Secrets Act.

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  7. Another consequence: as of 13 January, HMRC stopped accepting tax payments from personal credit cards.

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