IT normally set out tax and spending changes but last week’s budget included measures to promote a switch from cash to cards, even though this will have a negligible impact on the national finances.
The aim is to displace cash for small-value payments, with merchants and shoppers encouraged to switch to plastic instead. Cash is also being discouraged by making it more expensive to use ATMs. We explain.
WHAT’S WRONG WITH CASH?
Government believes the economy could save €1bn a year by switching to cards and other forms of electronic payments.
According to the European Central Bank, Ireland averaged 78 card payments per inhabitant in 2012. This was right on the EU average but way behind Scandinavia, Britain and the Netherlands, whose inhabitants use plastic more than 150 times a year.
WHAT’S PROPOSED?
Interchange fees, which merchants end up paying to your bank every time you use a card, are being capped. Consumer advocates claim they are a hidden part of the total charges paid by shops and businesses for processing card payments, acting as a deterrent to more widespread acceptance of plastic.
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Finance minister Michael Noonan said interchange fee on debit cards would be capped from December 9, in line with existing European rules capping interchange fees on credit cards. The aim is to save €36m a year in processing charges.
Noonan expects the cap will encourage retailers to stop the practice of declining card payments of less than a certain value.
WHAT ABOUT CARD TAXES?
From January, the annual stamp duty of €5 on debit cards will be replaced with a transaction tax of 12c on ATM withdrawals, with no tax when cards are used for purchases. Cardholders will not lose out because the ATM tax cannot exceed €5 a year, even if they make more than 42 withdrawals.
The change will widen a cost differential between ATM and debit card transactions. AIB Bank currently charges 35c for ATM withdrawals, which should increase to 47c when the transaction tax is introduced, while debit card purchases cost 20c. Bank of Ireland’s ATM charge of 25c should increase to 37c, while debit card purchases should remain at 10c.
The Irish are the second highest users of ATMs in the EU, according to the Banking and Payments Federation Ireland, withdrawing an average of €4,449 a year.
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ANY OTHER CHANGES?
The transaction limit on contactless payments will be doubled to €30 from the end of the month to encourage us to use cards instead of cash for small-value purchases.
This will raise fears about fraud, because contactless payments do not need a Pin, allowing anybody who finds or steals your card to use it.
Banks say contactless payments are secure because only a limited number of contactless payments can be made in succession before a Pin is required. Permanent TSB requires a Pin after three contactless transactions have been made in a row.
Fraudulent transactions will be reimbursed if you have taken reasonable steps to keep your card safe.
TOP TIP
Use cashback to withdraw money at supermarket checkouts will allow you avoid or minimise the new stamp duty on ATM withdrawals. Debit cards allow you request up to €100 cashback from retailers when making a purchase at no extra charge. Getting cash this way instead of using a cash machine means you never pay the new 12c ATM tax.