Shops barred from commission on credit card buys

Tuesday, 7 June 2011 2:18 PM

Credit charges in the UAE are some of the world's highest, analysts said

Shops in the UAE will be banned from charging consumers additional fees on purchases made with credit cards from next month, the country’s consumer protection agency said Monday.

Under a ruling from the Supreme Committee for Consumer Protection, retailers will be stopped from imposing surcharges on credit card transactions as commission, effective July 1, 2011.

Credit card fees are sprung on the consumer at the point of payment and are purportedly used to cover the cost to the retailer of processing the transaction.

The ruling, which suggests retailers are making an added profit on purchases, will help level the playing field for shoppers and tackle excessive card charges, said retail analyst Manu Ghai.

“The [credit card] initiative comes as a relief for not only the shoppers and consumers, but also for the companies, credit charges in the UAE being one of the highest in the region,” said Ghai, of London-based consultancy Planet Retail.

“The initiative is expected to support consumer rights, boost economic competitiveness and bring about [retail] growth.”

The UAE said in February that it would curb excessive bank charges to consumers in a rollout of wider regulations aimed at stopping excessive lending practices.

The central bank of the Gulf state capped personal loans at 20 times a borrower’s monthly salary and said repayment periods can’t exceed 48 months.

Monthly installments for all loans, including personal, car, housing loans and credit cards, must not exceed 50 percent of a customer’s gross salary and any regular income, the central bank said.

The move to curb credit card fees from retailers is a further extension of the changes, analysts said.

“The government has tried to make it difficult for the retail segment to borrow, and they seem to be doing something for the benefit of the consumer as well,” said Naveed Ahmed, a senior financial analyst at Global Investment House.

“They are not doing it from an economic point of view but from a social point of view.”

Retail is a key pillar of the UAE economy, alongside trade and tourism. Dubai, the shopping hub of the Gulf, is expected to see $7.8bn in tourism spending this year alone, according to data from Mastercard.

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Posted by: 404cameljockey Thursday, 16 June 2011 1:29 PM[UAE] - UAE

A point is being missed here. Retailers greatly increase their turnover and revenue when deciding to accept customers who have to pay by credit card (not everyone is cash-rich, some of you forget....). It is the retailer who should accept the charge by the card company, for their increased business, and they should not try to pass it on as a visible 'add-on' charge to consumers. If they want to try to increase their item prices to include the charge then fair enough, but stores which do not do that will reap the benefit, as shoppers will be drawn to their lower prices. Simple, no?

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Posted by: Minaka Wednesday, 15 June 2011 3:40 PM[UAE] - UAE

What about airlines like Air Arabia charging 3% extra when you book online with your credit card?

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Posted by: PParker Wednesday, 15 June 2011 9:48 AM[UAE] - Dubai

Visa charge 3% per every transaction. Agreed customers should be informed there is an additional fee of 3% for card use. I suggest the government should work with credit card companies and issue shop owners a small sign/sticker to be placed near cashier to be aware of customers if using card, there is a 3% additional fee applicable by Credit Card company - should clearly state charged by credit card companies not shop owner.

Posted by: keenObzerver Wednesday, 15 June 2011 6:43 PM[UAE] - UK

To PParker and Lex, the whole point of the article is that retailers will not be able to pass ANY credit card charges to the customer. The Visa and mastercard charges are designed and intended to be be born by the retailer.

The 3% or the 1.5% is something that retailers will have to live with, in return for the added business they receive from customers who purchase things above their means(=on credit)

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Posted by: Lex G Thursday, 9 June 2011 1:19 PM[UAE] - UAE

The charge Visa & Mastercard levies on the retailer is 1.5% and they will be entitled to pass this on. Anything above that is going to be illegal but really it's not going to make much difference.

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Posted by: Raj Wednesday, 8 June 2011 5:31 PM[UAE] - uae

Clearly such a force is not required. People are always advised that there is a 2% or whatver charge - and if they wish they go ahead with card else pay cash. I dont know whats the big deal about it. Also not incl DEWA and other govt bodies is weird as they are huge retail organizations with the largest affected audiences as all people subscribe to them. So seriously its not the small time guys who may affect a customer or two a day- we are talking thousands a day.

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