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Tue 7 Jun 2011 02:18 PM

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Shops barred from commission on credit card buys

Stores in the UAE have until July 1 to stop carving out commission on credit card buys

Shops barred from commission on credit card buys
Credit charges in the UAE are some of the worlds 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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Peter Peter 8 years ago

The consumers will be happy but has any one bothered to figure out why retailers charge the card fees to the customer ? Because the card charges are exceptionally high. And a 4 - 5% credit card charge eats in to the retailer's profit margins.

Why don't the authorities reign in the Banks and Credit card companies and put a "CAP" on the charges they levy for their various services ? I refer particularly to the interest charged or credit card outstanding amounts. Almost daily the banks are reducing their services and increasing their charges.

What is happening here in the banking sector is a scandal !!

Basel A-Shaban 8 years ago

Would that apply to airline tickets too?

Naval Kishore 8 years ago

How about SEWA which charges commission for utility bills paid by credit card or the petrol stations which stopped accepting payments by credit card.

Raj 8 years ago

So does this mean DEWA and all others like DEWA (i.e. govt bodies) will be barred from charging the 2% they charge on card payments?

Suresh 8 years ago

If such a rule was passed in India the retailers would all increase their prices marginally and start giving a " discount " to all "cash" customers - and every one would live happily ever after.

fred 8 years ago

very important points mentioned by the comments,need to be acted upon in a legal binding ways,I believe the retailers will increase their prices to offset the charges used to be levied,just watch the markets in coming months.

Abu Faisal 8 years ago

This is a good move. However, I expect shops in the UAE when customer pays by credit card he will be informed that the credit card machine is out of order, this has happened to me sevral time in different shops in Abu Dhabi. In such cases customer has no option but to pay cash for goods purchased. Please advice what can we do in such a case.

Raju 8 years ago

Nobody but we, the customers are going to suffer. For the seller it is very simple...... just load the extra amount in price and this is what unfortunately going to happen next.

Telcoguy 8 years ago

Just one comment. You can not force people by law to lose money> They will jut shut down the business and move somewhere else.

Telcoguy 8 years ago

Yes, and that is a perfectly valid answer... Managing the economy by regulation does not usually work.