This is with reference to the article entitled “Consumer body: Abolish surcharges on credit cards” published on Free Malaysia Today (FMT) on 19 March 2018.

Bank Negara Malaysia (BNM) would like to comment on two items in the article.

Firstly, the response provided by the Deputy Finance Minister in Dewan Rakyat is with reference to the interest imposed by credit card issuers on cardholders for outstanding credit card balances that are overdue, and not on surcharges imposed by retailers on credit and debit card transactions.

Secondly, BNM would like to inform the public that under the Payment Card Reform Framework introduced by BNM, retailers are not permitted to impose surcharges for payments using debit cards. A similar prohibition is applied for credit card payments under the rules of international card schemes such as Visa and Mastercard. The prohibition on surcharges is monitored and enforced by banks that provide e-payment facilities to merchants (acquiring banks). Consumers who encounter merchants that impose surcharges are advised to lodge a complaint with their respective banks or payment card issuers.

One of the reasons retailers impose a surcharge is to recover the cost incurred by the retailers when accepting card payments. Retailers are typically charged a transaction fee, also known as the Merchant Discount Rate (MDR). In general, the MDR for credit card is higher than the MDR for debit card.

Globally, countries have adopted different approaches in dealing with the issue of surcharges imposed by retailers for card payments.

In the European Union and the United Kingdom, retailers are prohibited from imposing a surcharge on consumers for credit and debit card transactions.

In Australia, retailers have the right to impose surcharge on customers who pay using the more expensive payment cards such as the credit card. The rationale of such approach is to send the correct price signal to encourage consumers to pay using the more cost-effective debit card.

In Malaysia, BNM has introduced measures such as the Payment Card Reform Framework and the Interoperable Credit Transfer Framework to lower the cost to retailers when accepting cost-effective electronic payment methods. This would in turn lessen the pressure for retailers to impose surcharge on customers.

To benefit from lower operational cost, retailers are encouraged to accept the more cost-effective payment methods, i.e. debit cards and mobile payments (instant fund transfers). Retailers who cannot afford to pay the higher MDR for credit card are encouraged to liaise with their respective acquiring bank to accept only debit card payments.