How often do you check your receipt after having your debit or credit card run at a point-of-sale machine?
Many shoppers are likely to just pull out their plastic money cards and not think about the charges on the receipt. Well, as we found out, you could be losing money through unauthorised charges.
Money has learnt that shoppers are being subjected to additional charges by some shop owners in what they claim to be a practice aimed at protecting their profit margins.
Ms Emily Kaiga, a corporate communications officer at Standard Chartered Bank, was once a victim of such charges.
Several other local shoppers have suffered the same exploitation, especially in high-value transactions.
According to contractual agreements between shop owners, often referred to as merchants in plastic money circles, and acquiring banks (the owners of the point-of-sale machines), shop owners should pay a commission to the respective bank as interchange fee for running a debit or credit card on the bank’s machine.
This is the additional charge that might have been subtly imposed on your card as shop owners shield themselves from parting with huge commissions to banks, given that the fee depends on the value of the transaction.
“According to our operating rules, only the transaction amount should be charged on customers. They should not pay anything above that,” said Mr Victor Ndlovu, Visa’s business development manager for East Africa.
According to Mr Ndlovu, the main reason cards were introduced was to encourage the use of plastic money and reduce reliance on cash transactions that often expose shoppers to the risk of losing money through theft and other vices associated with carrying cash.
However, he admitted that shop owners have taken advantage of unsuspecting shoppers and are now turning the platform into cash cows at the expense of their clients.
This practice, according to Mr Ndlovu, is threatening efforts to promote the use of plastic money despite the fact that the mode of payment is relatively safe compared to carrying cash in shopping malls.
“By so doing, merchants think that they are protecting themselves against costs, but in real fact, they are discouraging the use of plastic money.
“We have a universal process and procedure that indicates the manner in which merchants should conduct themselves and it also provides for punitive measures to be taken in case we suspect such a thing is happening,” said Mr Ndlovu.
The illegal practice is growing and judging by the response we got from a member staff who spoke anonymously at Kenya Commercial Bank’s Card Centre, local banks could also be having a hand in it.
The employee told Money that Visa requires customers not to pay anything for running their cards on point-of-sale machines.
However, this is allowable only if the shop owner discloses the intention to make an extra charge before running the card.
However, the bank contradicted these claims. “What the staff member meant was that the cardholder will be able to get the service needed and at the same time seek a refund of the disclosed extra margin that was wrongfully charged,” said Mr Fred Ojil, card issuing manager at KCB.
Visa’s position is that banks are not authorised to allow merchants to impose extra charges on card holders regardless of how the intention is communicated. This ambivalent interpretation of the rules leaves card owners exposed to exploitation by unscrupulous merchants.
Worse still, although a customer has the option of lodging an appeal at the bank where the card was acquired, it would not be easy to prove that he or she was informed about the extra charges and consented, making it difficult to get a refund.
Mr Kariuki Ngari, the Standard Chartered’s executive director for consumer banking, says that customers should always bear in mind that they are not liable to making any payment for such transactions.
“Customers using either debit or credit cards should not pay any additional charges. These charges should be between the merchant and the acquirer.
“Affected customers should report the merchant to the acquiring bank (that issues the point-of-sale machine) either by writing directly to the bank or through their bank,” said Mr Kariuki.
Should the bank not address the complaint, industry players advise that customers lodge their complaints with the Kenya Credit and Debit Card Association.
When you use your debit card to pay bills or shopping, you can sometimes choose how the purchase is processed. It can either be an online or offline transaction.
If you are asked to key in your personal identification number (PIN), then, that qualifies as an online transaction. The payment transaction gets completed electronically and it is done fast.
On the other hand, if you are not asked to provide your PIN and end up signing a charge slip instead, then that is an offline transaction.
Even though customers may not care whether the payment mode is online or offline, it matters a great deal to the retailers and the banks.
In an offline transaction, the retailer is obliged to pay a small percentage of your total purchase price, say 2 per cent. This charge normally goes to the bank that issued your debit or credit card as an interchange fee.
Simple computation shows that such a percentage charge accumulates to a large amount of money.
Indeed, banks and credit card companies would be pleased if many people choose to make their payments via debit or credit cards because they would get a commission for every purchase.
In the case of online transactions, the fee charged to the merchant by the bank is much less.