Amazon signs a truce with Visa on credit card fees

Amazon has reached an agreement with Visa that allows its customers to continue paying by Visa credit card. Saloni Sardana explains what's happened and why.

Amazon has reached an agreement that paves the way for it to continue accepting Visa credit card payments across all of its websites and stores, ending months of uncertainty over credit card fees. 

Under the deal, Amazon will no longer levy an additional fee to customers who use Visa Cards onsite in Australia and Singapore. The agreement also eliminates the threat of Amazon blocking Visa credit card payments on its UK store, the company told the Financial Times

Visa said: "This agreement includes the acceptance of Visa at all Amazon stores and sites today, as well as a joint commitment to collaboration on new product and technology initiatives."

Why did Amazon want to ban Visa credit card payments?

Amazon was due to ban UK visa credit card payments on 19 January this year because of what it says are “high fees… for processing credit transitions.”

Amazon first proposed the ban in November, and offered consumers a £20 Amazon voucher to encourage them to ditch Visa for an alternate form of default payment .

The fuss over Visa’s fees is to do with Britain’s departure from the EU, which meant that cross-border “interchange” fees, which are charged by credit card providers on behalf of the banks that issue them, were no longer capped. The result was that these fees shot up from 0.3% to 1.5%. 

Amazon has previously stressed that its spat with Visa is not to do with interchange fees but rather to with Visa’s long-term fees.  

But analysts branded Amazon’s threats as pressure tactics to convince Visa to offer co-branded cards, which rivals such as Mastercard and American Express have done. Visa currently does not offer co-branded cards. 

“Major players in the retail space tend to have bespoke rates with payment firms, rather than paying published rates. The pressure on Visa was likely a way to negotiate a longer-term agreement on rates, or even to push for a freeze to its current rates,” says David Ritter, financial services strategist at CI&T, an IT and software company. 

David Beard, editor-in-chief and personal finance expert of financial comparison site, Lendingexpert.co.uk, said the truce between both giants is a “welcome relief for Amazon customers” as not accepting Visa would have meant customers would be compelled to pay with a debit card or a new Mastercard. 

“Paying for items with a debit card means customers wouldn’t have benefited from Visa credit card perks like cheap borrowing if they had a 0% interest period, cashback, rewards and extra protection for purchases over £100,” Beard added.

Recommended

China’s economy is heading for a sharp slowdown
Chinese economy

China’s economy is heading for a sharp slowdown

With a slowing property market, Covid lockdowns sapping growth and the CSI 300 stock index down by 22% this year, China’s economy is in trouble.
6 Oct 2022
5 of the world's best stocks
Share tips

5 of the world's best stocks

Concentrating on a few highly profitable companies that excel in their fields can reduce the overall risk in your portfolio, says Rupert Hargreaves. H…
6 Oct 2022
The dangers of derivatives as the “Goldilocks era” ends
Investment strategy

The dangers of derivatives as the “Goldilocks era” ends

That this is no longer a benign environment for investors, says Andrew Van Sickle. But – as the recent pension-fund derivatives blow-up shows – not ev…
6 Oct 2022
There’s still time to submit your energy meter reading to avoid a higher charge
Personal finance

There’s still time to submit your energy meter reading to avoid a higher charge

You need to submit your gas and electricity readings as soon as possible to avoid overpaying after the October energy price increase.
6 Oct 2022

Most Popular

Should you take a 25% tax-free pension lump sum in instalments?
Pensions

Should you take a 25% tax-free pension lump sum in instalments?

Taking out a 25% tax-free lump sum sounds appealing but it might not be the best way to manage your pension
30 Sep 2022
Markets may have bounced, but this is not the end of the bear market
Stockmarkets

Markets may have bounced, but this is not the end of the bear market

Stocks are back on the rise, commodities and precious metals prices are up – even the pound has rebounded. But none of this is typical of bull markets…
5 Oct 2022
October’s Premium Bonds: how to check if you are a winner
Savings

October’s Premium Bonds: how to check if you are a winner

NS&I has added almost 110,000 more prizes to October’s Premium Bond draw – are you a winner?
4 Oct 2022