Credit and debit cards

[Grunty]

Many companies say something like "We process all card payments for a fee of 2.5% included in the price paid. The total price paid remains the same". Why do they say this if the price paid remains the same? Does this mean that cash customers are paying the same fee, or does it depend on them asking for a discount?

[Loosehead]

Yes customers paying cash can in theory ask for a different price. In fact it is quite legal for shops to have 2 prices if they desire but you hardly ever see it because they don't want to alienate the card brigade. You can usually get a discount for cash especialy for expensive items.

[Grunty]

Thanks Loosehead. It's puzzled me for a long time.

[Oneeyedvic]

Actually, its all down to an attempted VAT 'evasion' - the principle behind it is that the 2.5% is not VATable, so the compnay can get the whole amount of the 2.5% - and not have to give 17.5% of this to the government. Although 17.5% of 2.5% doesn't sound like alot, do that in all your shops and it is a huge amount!

Further link: http://www.vatease.co.uk/news/vat-newsletter-august-2005.htm

[Grunty]

Thanks Vic. Reminds me of museums asking visitors to sign to say they had paid a donation and not an admission charge, so they can claim tax back. Very interesting site. I am tempted to ask what proportion of VAT is spent on lawyers.

[Oneeyedvic]

If they win the case - it would be well worth it - Based on the fact that a lot of these companies will have turnovers of over �1 Billion