Budget changes mean customers won’t pay fee for cashback transactions

Consumers who use their debit cards to obtain cash back from retailers will not have to pay a fee to the Government under changes to the stamp duty regime for bank cards announced in Budget 2016.

On Tuesday, Minister for Finance Michael Noonan announced that the €5 annual stamp duty charged for ATM/debit cards would be abolished from January 1st.

In its place, a charge of 12 cent per ATM withdrawal is being introduced up to a cap of €5 a year, while debit card transactions will attract no duty. This is part of a move by the Government to encourage people to move from cash to electronic payments and formed part of the national payments plan in 2013.

Debit card purchases

The Department of Finance yesterday confirmed that debit card purchases in shops or pubs involving cash back for the customer would not incur a fee under the new charging structure.

It is understood that even though these transactions involve cash effectively being withdrawn for a customer’s current account, they are usually at a much lower level than ATM withdrawals.

In addition, cashback is seen as a cost-efficient way for retailers to recycle their cash without having to incur bank fees and reduces the security risk of holding large sums of money on their premises.

About 60 per cent of consumer transactions in Ireland are in cash, with Irish people withdrawing as much each month from ATMs as Danes do in a year.

Administrative headache

Mr Noonan’s budget move took the banks by surprise and leaves them with something of an administrative headache. Instead of applying a €5 fee once a year to customer accounts and remitting the sum to the Government, banks will now have to track each customer transaction to calculate how much they owe the State in ATM fees.

Under the Minister’s plan, customers will save money if they carry out fewer than 41 ATM withdrawals a year, albeit that the saving will amount to a couple of euro at most.

Budget documentation published this week shows that the stamp duty move will be cost neutral to the exchequer.

Ironically, most Irish banks will continue to charge customers for debit card transactions, although these fees are usually lower than for ATM withdrawals.

The budget also saw Mr Noonan increase the transaction limit on contactless payment cards from €15 to €30 from October 31st.