Irish people like to use cash. In fact each of us withdraws an average of €6,000 in cash from the ATM each year – that’s double the EU average.
But both banks and businesses are encouraging us to switch to plastic and they say it’s less expensive to process and it’s safer for us to use.
So just what are the benefits in using your credit or debit card? And what should you watch out for? Tina Leonard runs through the pros and cons with Pat Kenny.
According to IPSO (the Irish Payment Services Organisation), in 2010 just over one third of all transactions were non-cash based, compared to the EU average of 96%.
However, our habits are moving in the direction of our European neighbours, as 2010 was the first year where the amount for payments using cards exceeding the value of cash withdrawals from ATMs.
Cards: Where to use what type
Credit card – use online, at ATMs or shops anywhere in the world.
Debit card – Laser is not always accepted online but usable at ATMs or shops anywhere. Visa or Mastercard debit cards have the same functions as credit cards.
Pre-paid cards – use online so handy if you want to avoid running up a credit card bill. You mightn’t have a physical card though so if not won’t be able to use in shops.
Laser: There seems to be a misconception out there that Laser is different to a debit card, when in fact that is exactly what it is. It is exactly the same type of payment instrument as Visa Debit and Debit MasterCard. We are just so familiar with the Laser brand here, that it has become like the term ‘Hoover’, which we all use to describe a vacuum cleaner. Laser, like Hoover, is just a brand; a debit card brand.
However, Laser is being withdrawn over the next 18 months or so, so instead your bank will issue you with a Visa debit card or debit Mastercard. (Ulster Bank and PTSB have already switched to Visa debit.)
Things to watch out for
Government tax: You pay €30 per year stamp duty on a credit card and €5 per year on a debit card (combined ATM and debit).
Interest: If you don’t pay your credit card bill each month, you’ll pay a hefty interest rate on the money owed.
Purchase fees: Pre-paid cards are all Mastercard or Visa but there are different costs depending who you buy one from (i.e. Rubycard, o2, Swirl, Payzone, Moneybookers, 3V etc). There can be a one off purchase fee, then monthly fees and loading or transaction fees so choose carefully.
Advantages of cards: access to the global market
The most obvious gain over cash is that using a card immediately gives you access to a global market, something that cash can’t do. You can use your card when buying online from any trader in the world, and when you go abroad you can use it at an ATM machine or in a shop no matter what currency.
In addition if your wallet is stolen, you won’t be able to have any cash in it refunded, but you can easily cancel your card.
If you have a Laser card it will have Cirrus and Maestro symbols on the back (close to 100% are branded this way). Cirrus is the ATM function and Maestro (part of Mastercard) is for Point of Sale, so wherever you see a MasterCard or Maestro sign you should be able to use your co-branded Laser card, whether in a shop or at an ATM abroad.
The only place where there may be an issue is in the UK. It can be used anywhere else in the world but in the UK some merchants still use old UK domestic Maestro rules so their terminals may not match the Maestro spec on the card but there are fewer and fewer of these merchants now.
Things to watch out for:
If using your debit card in and ATM in the eurozone there should be no additional fees or fees should be no higher that you would be charged here. But beware additional bank fees and currency conversion fees when outside the eurozone.
If using our credit card to withdraw money from an ATM abroad, like at home there will be fees so pre-load your card so that it is in credit if planning on using it this way when travelling.
When paying with your card abroad, if you are given the option of being charged in euro or the country’s currency, always opt for the currency of the country you are in.
Whether you pay with credit or debit card, these all come with chargeback facilities. This means that if you have a problem with the purchase your bank should be able to issue a refund, called a chargeback. Obviously this is not something you get when using cash, and it’s a big advantage of paying with a card.
There are many reasons why a sale may be charged back. The general rules are the same for Mastero/Laser card and for Visa and Mastercard (debit and credit cards).
The main reason for chargeback is fraudulent use of the card but other reason are:
Duplicated transactions; Refunds not processed; Fraud on the card; Unauthorised transactions processed; Multiple transactions processed; Sale on an expired card; Sale on an unidentified account.
However, there are two specific circumstances where a chargeback can happen on a credit card or Visa/Mastercard debit card but NOT on the Laser card.
These are when the goods are not received or are not as described. This is very important to know as this will include scenarios where the goods are not received because the retailer has closed down for example, or where for example, you’ve bought a ticket online from a secondary ticket agent but the ticket never arrived.
Things to watch out for:
If you want this added security of chargeback in the case of a shop closing down for example, don’t use your Laser card, use your credit card or Visa/Mastercard debit instead. This is especially important if you’re buying an expensive item like a piece of furniture but delivery is some months down the line, or if you’re paying up front for a series of beauty treatments for example.
Check with your bank for any time frames on requesting chargeback, as different procedures may apply. For example, some will want proof of the business closing down, other not and if it’s a concert ticket that hasn’t arrived you’ll have to wait until after the concert has taken place before you apply for your chargeback/refund.
Remember if you are disputing a sale and don’t have a receipt, your debit / credit card statement will provide proof of payment, so there is a record there that paying in cash won’t give you.
Beware online scams where the trader levies very high charges for using a card and so you opt to pay by bank transfer instead. This gives you no security of chargeback and with this particular ploy the products bought tend not to turn up.
Extra charges for paying with a card
There is a practice, sometimes used, of charging customers a hefty fee for paying with a card, generally for online sales and that’s clearly a negative for the consumer.
The most obvious examples are Ryanair and Aer Lingus, both of whom charge an admin fee of €6 each way, unless you use certain cards (Mastercard pre-paid with Ryanair and Visa Electron with Aer Lingus).
These charges do not directly relate to the charges the business has for accepting cards. For example, for debit cards the cost would be between 10c and 20c and for credit cards (depending on size of the company, volume of sales, equipment rental etc), the cost to the business will be around 1% to 2.5% of the sale.
Thankfully these ‘surcharges’ will be banned, according to EU legislation (the European Consumer Rights Directive). It’s not due to come into force until towards the end of 2013 but back in October last year Minister Bruton stated his intention to bring forward some aspects of this legislation by Statutory Instrument this year, including the ban on excessive payment fees. In Britain they have also said they will bring that part of the law in this year.
It means that traders will not be able to charge consumers more for paying by card than what it actually costs the trader to offer such means of payment, so that is something to look forward to.
According to IPSO it actually costs a business less to accept payment by cards rather than cash, given the time and security issues involved in accepting cash.
And while there may still be some retailers or service providers willing to sell at a better price if you can pay in cash, cash is no longer king.