BNM: Surcharges on debit, credit card payments not allowed

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KUALA LUMPUR (March 21): Retailers are not permitted to impose a surcharge on debit or credit card payments, Malaysia's central bank said on Wednesday, urging consumers who encounter merchants that do so to lodge a complaint with their respective banks or payment card issuers.

One of the reasons retailers impose a surcharge is to recover the cost incurred by them when accepting card payments because they are typically charged a transaction fee — also known as the Merchant Discount Rate (MDR).

In general, the MDR for credit cards are higher than for debit cards, but Bank Negara Malaysia (BNM)'s Payment Card Reform Framework (PCRF) does not allow retailers to impose a surcharge on debit card payments while international card schemes such as Visa and Mastercard have a similar prohibition for credit card payments, the central bank said in a statement.

"The prohibition on surcharges is monitored and enforced by banks that provide e-payment facilities to merchants (acquiring banks)," it said.

BNM's statement was in response to comments by Deputy Finance Minister I Datuk Othman Aziz in Parliament last week that there would be no abolishment of interest charges on credit cards.

Othman reportedly said scrapping interest charges would only encourage excessive spending and a lack of discipline among credit card holders.

He said as at December last year, there were 9.9 million credit cards in circulation, 8.8 million of which are primary cards registered to 3.7 million individuals.

BNM said it had introduced in Malaysia measures such as the PCRF and the Interoperable Credit Transfer Framework to lower the cost to retailers when accepting cost-effective electronic payment methods.

"This would in turn lessen the pressure for retailers to impose (a) surcharge on customers," it added.

However, BNM observed that globally, countries have adopted different approaches in dealing with the issue of surcharges imposed by retailers for card payments.

In the European Union and United Kingdom, retailers are prohibited from imposing a surcharge on credit and debit card transactions.

But in Australia, retailers have the right to impose a surcharge for credit card payments.

"The rationale of such approach is to send the correct price signal to encourage consumers to pay using the more cost-effective debit card," BNM observed, adding retailers who cannot afford to pay the higher MDR for credit cards should liaise with their respective acquiring bank to accept only debit card payments, or alternatively opt for mobile payments (instant fund transfers).

Following Othman's comments, a news portal reported that Consumers Association of Subang and Shah Alam, Selangor president Dr Jacob George had urged the government to abolish surcharges imposed on debit and credit card transactions as it was unfair to users.

In response, BNM clarified that Othman was responding to the interest imposed by credit card issuers on cardholders for outstanding credit card balances that are overdue — and not on surcharges imposed by retailers on credit and debit card transactions.