In November last year, Amazon revealed it would no longer accept payments using Visa credit cards from 19 January 2022. Then, on 17 January, just two days before the change was due, Amazon announced a U-turn, saying it would “no longer take place”. Meanwhile, Visa said it was “working closely to reach an agreement”, suggesting the dispute is almost over.
So what does it all mean if you’re an Amazon shopper? And if you’ve already changed your method of payment to continue using Amazon, is it worth switching back? Let’s take a look.
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What was the dispute about?
In November, Amazon announced it would no longer accept Visa credit cards from 19 January 2022. The world’s largest retailer revealed it had made the decision as a result of Visa’s high payment costs.
‘Payment costs’ refer to the fees charged to retailers by payment processors in order to process digital transactions.
Credit card payment costs had previously been capped by the European Union. However, since the UK left the EU, both MasterCard and Visa have hiked their costs in Britain.
In November, Amazon said Visa’s costs were “an obstacle for businesses striving to provide the best prices for customers”. Meanwhile, Visa accused Amazon of restricting consumer choice. The payment processor released a statement claiming “when consumer choice is limited, nobody wins”.
Why has Amazon changed its mind?
While it’s not clear why Amazon reversed its decision, the U-turn indicates recent talks with Visa have been constructive.
According to Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown: “A truce has been called in the game of brinksmanship between Amazon and Visa with the e-commerce giant appearing to relent and allow credit card customers to continue shopping on the site.
“The two sides have not completely backed down, but last-ditch talks over the weekend appear to have been productive and certainly Amazon is coming across as a lot more conciliatory in tone.”
Streeter goes on to make clear how it’s in the interests of both companies for Visa credit cards to be accepted on Amazon. She explains: “Higher fees being charged by Visa remain a bugbear, and it’s likely that a long-term solution will involve some movement here, but it’s not in either companies’ interest for a war of attrition to restart, with the prospect of significant losses in UK business for either side.
“This is a niggling headache Visa will want to see lifted as it grapples with competition from start-ups and more established rivals. But it does still remain the world’s largest payments processor and is still positioned squarely in the centre of the global shift towards cashless payments.”
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What if you’ve already changed your payment method?
Ahead of the change, Amazon wrote to customers with a Visa credit card as their default payment method.
To encourage these customers to change their cards, Amazon offered cash payments to switch. Prime members switching to a Mastercard credit or debit, Visa debit or Amex card received £20. Non-Prime members received £10. As a result, it’s likely many Amazon customers have already moved away from Visa credit cards.
If that includes you and you’ve switched to a debit card, then it’s worth considering whether you should change back. That’s because credit cards offer free Section 75 protection on purchases costing over £100 (and under £30,000).
As Susannah Streeter explains: “For consumers, if you’ve swapped your saved card on Amazon in expectation of the ban on Visa credit cards, it’s worth thinking carefully whether a credit card is the right option.
“If you make specific large purchases and want the extra protection, it may well be worth switching back, but if it tends to mean you run up larger credit card debts, now could be a good time for a change.”
Streeter also highlights how the last-minute U-turn may annoy Amazon customers who applied for a new credit card in anticipation of the change. She explains: “Unfortunately, this kind of 11th-hour change is no good to people who have been forced to apply for a new Mastercard credit card. If you’ve already applied, it will already show on your credit record. It’s hardly fair that consumers should pay the price for two massive corporations facing off against one another.’’
Are you a regular Amazon shopper? See our article that explains why you should think twice before using its new Buy Now Pay Later service.
