Oh well done, well done!

ALL British shoppers could get £400 compo after scandalous £19BILLION Mastercard ‘rip-off’

MILLIONS of shoppers are set to receive hundreds of pounds in compensation as a result of a £19MILLION legal claim being launched against MasterCard over “illegal” card charges.

The number changes by three orders of magnitude between the headline and the sub. Pretty good going that.

24 thoughts on “Oh well done, well done!”

  1. How would this work? Surely the amount of compo should correlate with the amount of use, and some people don’t use credit cards very much, or use them only online.

  2. And the idea that Mastercard made £19 billion in *excess* profits!?!
    But the second paragraph talks of millions of shoppers getting hundreds of £ each is based on the £19 billion figure not £19 million.
    .

  3. Um, companies set their pricing after working out what their costs are? This is supposed to be fraud?

    Also, there’s a person out there with the name Boris Bronfentrinker?

  4. Yes, the larger figure is correct. The time period is 1992 to 2008. Plucking some figures from elsewhere, I get a back-of-the envelope calculation of £1,500bn spent on Mastercards during that period. Assuming they charged 1% instead of the post-2008 limit of 0.3%, they would have earned £10.5bn in excess fees. Given the margin of error in my figures, the £19bn quoted in the article seems plausible.

    That said, I don’t understand why Mastercard is at fault for setting its fees at whatever level the market allowed before they were regulated.

  5. “Shops offset the charges by increasing prices across the board – meaning even cash buyers without credit cards may be entitled to compensation.”

    Amazing.

  6. john77,
    As I said, the £1,500bn and the 1% are both back-of-the-envelope estimates based on a few minutes Googling.

    More problematic is how a company whose revenue has been slashed from 1.0 to just 0.3 is supposed to find the money today.

  7. @ Andrew M
    By abolishing cash-backs – MBNA was giving 0.5% back to its customers until March this year – and reducing bad debt costs by better management.
    The profit margin had improved markedly between the1960s and the 1990s with cheaper and better computers so overheads shrank per transaction and even more as a %age of sales. Most banks spent £ms on marketing to attract customers without worrying too much whether they could afford to repay their debts.

  8. john77,

    The 0.5% cashback is offered by the bank (MBNA in your example), not by the card processing company. Since the card fees are capped at 0.3%, that should be self-evident.

    The bank expects to earn the money back in interest charges.

  9. As someone who prefers* using cash I would rather see the prices I pay drop. I don’t need the money back. What I want is to go into the local convenience store and see the cash price with an added fee at the register depending on what payment option I choose. That way I could choose the pay $1.59 for a candy bar with cash or $1.97 for credit, not $1.89 for all customers.

    * I started preferring cash once I understood the burden credit purchases place on small businesses.

  10. After accidently pissing off a couple of suppliers by bouncing credit payments on them, for 30 years I’ve prefered real money or pseudo-real money in the form of a debit card. I won’t let the banks trick me into using a payment method that is not capped by the amount of money I actually have in my bank account.

    Even debit cards I don’t like as it’s all too easy to chuck an extra loaf in the basket knowing I can pay for it with the card, instead of being limited by the amount of physical coins and paper I have in my pocket.

  11. Liberal Yank,

    Cash isn’t cost-free. Aside from the physical danger of having lots of cash on the premises, there’s also the logistics of depositing it in your local bank. Even a small corner shop will have thousands of pounds (or dollars) to deposit each week. Paying a fraction of a percent may well be worth it to reduce the cash burden.

  12. Andrew M,

    Combo Mart, my local corner shop, doesn’t pay a fraction of a percent. Their fee was 35¢+2%. My typical purchases are less than $2. That means if I pay electronically the cost is 19.5%+ of the purchase price. It is stupid to not use cash at the corner store.

  13. I have often wondered if I am doing harm to small retailers when I use a card rather than cash.

    If they’re a small operation I’ll usually use a debit card (some places in my area won’t take credit cards at all or have a ~£1 additional charge for them). I’d pay cash but I know cash incurs costs too. Having said that it isn’t clear to me if the extra cost of cash for one more customer paying in it is basically zero (because other customers, especially older ones, will still be paying in cash too, so the logistics are basically the same with or without my addition to that).

    If I don’t want to be an arse, what’s the best way to pay small businesses?

  14. Bloke in Costa Rica

    “If I don’t want to be an arse, what’s the best way to pay small businesses?”

    Pillowcases full of crisp fivers, snout, and/or Krugerrands.

  15. MyBurningEars,

    You could always ask the owner. Assuming they have a moment they will gladly let you know what method is best for their needs. In my experience cash is king. The only reason there isn’t more hatred of credit/debit is that is against the terms and conditions, just like having those customers pay the associated fees directly.

  16. @ Andrew M
    The cash-back disappeared when and, according to MBNA, because a cap on fees was imposed. So it is far from obvious that the 0.3% ever covered the 0.5%.
    You may be correct, but that was the excuse they gave me when changing the terms of the contract.

  17. Aside from the physical danger of having lots of cash on the premises, there’s also the logistics of depositing it in your local bank

    And if you make deposits too often, the nasty Feds (at least here in the US) will go after you for “structuring”.

  18. Liberal Yank,

    Here in the UK, a typical merchant service fee for a UK debit card transaction would be 0.6% + 1p; so on a £2 purchase the fee is 2.2p.

    Higher fees are charged for credit cards; for non-UK cards; for non-secure (i.e. non-chip) transactions. Overall though, the UK is quite good at keeping banking costs low.

  19. Ted S.

    The “structuring” regulations (of which you speak) as they now exist have been in force (virtually unchanged, as far as I know) somewhere in the early ’70s, imposed (according to gov’t explanations to banks to pass on to their customers) to thwart the allegedly enormous potential TRANSFER OF MONEY TO CUBA.

    I am aware of this because it happened to me, when (not wanting to carry such an amount while travelling) receiving a wire transfer from a customer company for payment to a party requiring a cash payment in a transaction in which I was not involved. It was then that (from the bank), I first heard the
    term “structuring” when I proposed doing the thing over in smaller transfers. In one way or another, I was able to solve the problem (though I completely forget just how).
    (Incidentally, though a great amount of what would ordinarily be ordinary trade with Cuba has been, technically, outlawed, the U.S.–through all of those years– has remained Cuba’s
    leading trading partner–much of which trade is categorized as “humanitarian.”)

Leave a Reply

Your email address will not be published. Required fields are marked *