Please ensure Javascript is enabled for purposes of website accessibility

Mastercard Sharply Increasing Fees on U.K. Purchases of European Union Goods and Services

By Eric Volkman - Updated Jan 26, 2021 at 6:13PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

It's yet another example of the economic fallout from Brexit.

Mastercard (MA 0.54%) customers in the U.K. are in store for some sticker shock this coming autumn. The company intends to dramatically increase its main debit and credit card fees in the wake of Brexit, the country's political and economic separation from the European Union.

As reported by the Financial Times on Sunday, starting on Oct. 15, the interchange fee for Mastercard's credit cards is set to rise to 1.5% of the total transaction value for each purchase made by British consumers of a good or service originating from the EU. That's a five-fold jump from the current 0.3%. For debit cards, it plans to boost the rate from its present 0.2% to 1.15%.

A woman handling a set of payment cards.

Image source: Getty Images.

The newspaper cited the example of Amazon (AMZN -4.31%), which typically sells its wares for the U.K. market via its operations the EU nation of Luxembourg. Assuming that Amazon does not dramatically expand its U.K. logistics footprint in the next few months, a customer in the country using a Mastercard would be subject to the new interchange rates.

Also called the "swipe fee," interchange is levied by payment card networks and issuers to cover the expenses related to credit risk and other factors involved in card management. These fees are typically modest in percentage terms, but can add up considerably with large purchase volumes or on sizable, one-time buys.

In 2015, in a move to protect consumers and businesses from hidden fees, the EU mandated a cap on interchange fees. But the U.K. has no similar cap in place, and after Brexit, this restriction will no longer apply to transactions that are inter-regional.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Mastercard Incorporated Stock Quote
Mastercard Incorporated
$340.70 (0.54%) $1.84, Inc. Stock Quote, Inc.
$2,207.88 (-4.31%) $-99.49

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/18/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.