Many small shops in the UAE are still imposing a fixed fee on credit card holders in their dealings despite a government decision to ban such surcharges from the start of July, dealers and credit card users said.
Credit card holders complained that they are still paying 2.25 per cent of the value of their purchases but dealers defended their action as a compensation for the low profit of the sale of some products.
Mobile phone dealers in Abu Dhabi said they have no choice but to levy that percentage on the grounds their profit from a brand new handset could be as low as Dh10-20 and that they could lose in case they do not charge the customer.
“When I sell a new mobile phone for Dh500 and its cost price is Dh490, how can I make any profit if I don’t charge the credit card holder….in case I don’t charge that percentage, then I will lose Dhone in the handset…how can I continue my business if I lose in every handset,” said Imad Hariri, sales manager at Golden Crown, one of the largest mobile phone shops in the capital.
“This fee on the credit card is not going into my coffers….it goes to the Visa company network and possibly to the bank…so if authorities want to tackle this problem, they also should talk to the banks.”
Bowing to recurrent public complaints, the ministry of economy decided to ban credit card surcharges at all shopping outlets from July 1 and officials said most of them were abiding by the decision a few days after it was enforced.
Random inspection of shops and other retailers by the ministry and local departments last week showed there was no violation of the decision that involves a fine of up to Dh100,000 for offenders.
“Our inspection teams have visited many shops to ensure the implementation of the decision…they checked many invoices paid by credit cards and found that there were no violations…we have also not received any complaint from consumers,” Hashim Al Nuaimi, director of the consumer protection division at the ministry of economy, said last week.
He said the ministry had asked all shops and supermarkets to stick posters to inform customers that there will be no surcharges on credit card transactions.
Nuaimi confirmed that offenders would be subject to penalties ranging from Dh5,000 to Dh100,000 and warned all shops to respect the ban to avert fines.
“When I shop at such large supermarkets as Carrefour and Lulu centre, I don’t pay any fees on my visa card,” said Mohammed Zaabi, an Emirati.
“But I always pay a 2.25 per cent fee on any deal at mobile phone shops and other small businesses…they say that they could suffer from losses if they don’t collect that fee, which they believe is shared by the bank and Visa network.”
Mobile phone dealers on Defence Road, the main mobile phone shopping centre in Abu Dhabi, said they could either charge a fee or raise the original price of the product to avert losses. “In either case, the customer will not like it…but I think it is better to levy that fee than raise the price and cheat customers…I think this fee poses a problem to the customers and to us as well,” said Mohammed Gaddah, owner of Al Asala mobile phone shop in the capital.
In recent statements, an official said the decision to ban levying fees on credit card dealings would be applicable only to purchase of goods from shops as it does not cover paying fees for government services.
“Government services are different from purchase of goods as they provide an extra service to consumers…the alternative is to pay cash because public services account for less than 10 per cent of goods purchases,” said Mohammed Al Shehi, director of the ministry of economy “Using credit cards by their owners in buying goods accounts for more than 90 per cent of their total card transactions and that is why we have issued the ban…we decided that it is not fair to collect extra fees on the purchase of a known consumer item just because the buyer does not pay cash.”
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