The IFR and consumers
What does the IFR mean for people using a card for everyday purchases?
This page provides information for customers who make everyday card payments.
It explains the various fees that are paid by the shops you use, in particular the interchange fee, for which we have some regulatory oversight in the UK.
In most cases when you use your card to pay for goods or services in a shop or online, your bank will charge a fee to the merchant’s or retailer’s bank (except for American Express cards). This is known as the interchange fee.
The merchant’s bank charges the merchant for accepting card payments. This is called the ‘merchant service charge’ (MSC). The MSC is made up of several components which usually includes the interchange fee.
Retailers may reflect the MSC in the retail prices charged to all consumers for goods and services.
What happens when you spend on your debit or credit card?
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Interchange Fees and the Interchange Fee Regulation
The Interchange Fee Regulation (IFR) is European Union (EU) legislation that has brought major changes to the way UK card schemes (such as Visa and Mastercard) operate, most notably by introducing a cap on certain interchange fees applicable to payment cards. Certain fees relating to some American Express card transactions are also capped.
The European Commission’s intention with the IFR caps is to redistribute the revenue from card-issuing banks to merchants and on to consumers. To read about the IFR in more detail visit the IFR section of our website.
The IFR caps certain interchange fees but does not cap the MSC or set requirements on how merchants should respond to any changes to the charges they face. So it doesn’t directly affect any extra charge you may have to pay for using your card in a shop.
Charges for making card payments
For now, shops are allowed to charge their customers extra if they pay by card. However, the Consumer Rights (Payment Surcharges) Regulations 2012 only allow merchants to charge consumers what it costs them to accept card payments – and no more.
The law on surcharging will be changing as the UK implements a revised EU directive on payment services. When that law is implemented, merchants will not be able to surcharge cards where the IFR caps apply.
If you feel you’ve been overcharged by a merchant for using your card, contact your local trading standards authority or the Department for Enterprise, Trade and Investment in Northern Ireland.
Find out more
Click the links below to learn more about the IFR and how it affects people and businesses.