High Credit and Debit Card Fees in Iceland

credit cards Arionbanki

Each transaction made abroad with an Icelandic debit card costs nearly ISK 118 [$0.85, €0.79], RÚV reports. A credit card transaction made abroad can cost nearly ISK 200 [$1.44, €1.34]. The chairman of the Consumers’ Association of Iceland says these transaction fees are much higher than in Denmark, for example, and point to a lack of competition between banks in Iceland.

The figures are from a newly-published report from the Central Bank of Iceland on the cost of fund transfers in the year 2022. That year, a debit transaction within Iceland cost an average of ISK 20, but abroad an average of ISK 118. Within Iceland, credit card transactions cost an average of ISK 51, but abroad they cost an average of ISK 177. For debit cards, that figure includes both the transaction fees and annual fees. Credit cards do not carry transaction fees in Iceland but do have annual fees.

Breki Karlsson, the chairman of the Consumers’ Association of Iceland, says these fees are on the rise. “And in international comparison, they are significantly higher as a proportion of GDP than in Denmark, for example.” Fees for using payment cards abroad are applied in the form of exchange rate surcharges, paid every time a payment card is used at a sales merchant. This surcharge does not apply to debit cards issued by Indó, a newer Icelandic bank. Some card issuers also add a transaction fee on top of the surcharge.

New Payment App to Launch in 2024


The Central Bank of Iceland is spearheading a new mobile payment app for smartphones to be introduced as early as fall of 2024, Heimildin reports. When up and running, the app should help lower prices and stabilise payment systems, according to Central Bank Deputy Governor Gunnar Jakobsson. Over 90 percent of transactions in Iceland are now made with payment cards.

Similar to apps in Denmark, Sweden and Poland

Icelandic financial institutions and the Central Bank have agreed on developing the peer-to-peer payment solution that would allow consumers to purchase goods and services without using the payment systems of VISA or Mastercard. The consumer could download this app to their phone and pay with a direct bank transfer. The service would be similar to MobilPay in Denmark, Swish in Sweden and Blik in Poland.

Prime Minister Katrín Jakobsdóttir is expected to introduce a bill requiring financial institutions to participate, which Alþingi will need to pass into law. The goal for the authorities is to increase the stability and security of payment systems in Iceland, with the possible side effect of bringing down costs of financial transactions in the country with a less expensive solution. As it stands, Icelanders spend more on credit card fees than their Nordic counterparts.

Market to dictate who benefits

Only two to three percent of payments in Iceland are concluded with cash payments, with the vast majority made with cards. Gunnar says that this split is unacceptable in the eyes of the Central Bank from a security standpoint. For example, a cyber attack on a service provider in November stopped payments for hours. He argues that a middle solution of simplified bank transfers would increase stability and also reduce the costs that consumers face for their everyday card use.

“It’s often hard to think of the whole picture, but if we manage to lower the cost of payment systems in the country, economics tell us that it should eventually lead to lower prices,” Gunnar told Heimildin. “Who benefits from lower prices, whether it will be the consumer or the provider of goods and services, is something that market competition will dictate.”