Merchant fees which are at most times conveniently passed on to the customer should not be borne by the customer, the Central Bank asserted this week.

As per agreements inked between banks and vendors, the fee must be absorbed by the merchant himself.

Speaking on the issue, the Central Bank’s Senior Deputy Governor, Yvette Fernando said they have made aware the merchants at times who should bear the merchant fee which often gets added to the cost of purchase, and has made even the banks aware to pass on the message and to ensure that this doesn’t recur.

Although the practice has been known and in public for a very long time, no one or nothing has been done to address the issue. And it appears even the continuous awareness campaigns the Central Bank claims to have been conducting have not been followed by the merchants and even the banks.

“That is a merchant charge that is to be borne by the merchant. But what happens is sometimes they pass it on to the customer. We have kind of made the merchants continuously aware of it and telling the banks also. And Also VISA and Mastercard, the card providers also make this awareness”, Fernando said at a post-meeting press conference held this week to announce the monetary policy decisions.

“And during our sessions, we have here with the banks’ CEOs and others we continuously tell them it shouldn’t happen. And customers are also good to be aware that it is not to be borne by the customer because there is an agreement signed saying the merchants will bear this merchant charge”, she added in what could be crucial information for card users so that they could push back when merchants try to pass their fee to the cardholder.

As of late in the wake of the hike in the value-added tax and the removal of most of the exemptions from VAT, consumers have shown growing awareness of what they pay and what tax they are charged.  

And there were instances in the last couple of weeks where people have refused to pay the VAT when the merchant had failed to issue a VAT invoice.

Having to bear additional charges up to 3.5 percent on the purchase price made via one’s credit card is akin to an additional tax for the consumers who have already been battered by the multiple higher taxes and the record-high inflation that prevailed for over two years.

Card payments’...

Although the official inflation has eased to mid-single digits in recent months, the prices of goods and services which rose manifold during the last two years haven’t budged and are still rising at the rate of inflation on average which is currently at around 5 percent.

Some have pointed out that the practice of passing down the merchant fee to the buyer will dissuade people from using cards to make purchases, making it difficult for the officials to nudge society away from hard currency use, to more card and digital-based payments.

In Sri Lanka there are still only less than 2 million credit cards in active and the base has slightly shrunk during the last year as many white-collar types who were using a card migrated in droves while the banks tightened credit standards to minimise the fallout from the economic crisis on their asset quality.