A cap on the fees banks charge retailers for processing debit and credit card payments has come into effect today.

Interchange fees are charged by a card holder’s bank to a retailer for both debit and credit card transactions. The new rules state that fees will be capped at 0.3% on credit card transactions and 0.2% on debit card transactions.

Under the previous regulations, typical interchange fees ranged from around 8p to 11p per debit card transaction and between 0.77% and 1.5% of the transaction value for consumer credit cards.

The new cap on interchange fees is estimated to save UK retailers approximately £480m per year, according to the British Retail Consortium.

Welcoming the new cap, Association of Convenience Stores chief executive James Lowman said: “We are pleased that these limits will now be applied to card transactions as we argued strongly in the EU and at the Treasury that limits were required.

“Around one in five convenience store customers currently pay by card, with contactless payments also growing significantly over the last year, so placing a cap on retailer’s costs for processing these transactions is necessary for convenience stores.”