By Jamie Ee Wen Wei

Some beauty salons and spa merchants are up in arms after Citibank decided to withdraw its credit card terminals from their shops.

In a letter to several of them two weeks ago, the bank said it was taking back its credit card terminals from Nov 26.

At least 10 shops - both big and small players - were hit by the move, a check by The Sunday Times found. These shops had been wooing Citibank card holders as a result of an earlier tie-up with the bank.

The terminals are for credit card transactions as well as instalment payments for bank card holders.

Operators of the affected shops said they were shocked by the 'sudden' termination.

Mr Tomio Tong, 43, said the bank had never indicated if there were problems since its terminal was installed in his salon, in the City Hall area, 12 years ago.

With his sole credit card terminal gone, his customers will have to pay cash until he gets another bank's terminal.

He is particularly upset that Citibank gave no good reason for the termination. 'When I called up, I was simply told it was management's decision,' he said.

Several other operators with only Citibank's terminals said they too will have to do without credit card payment for some weeks.

Mr K. B. Lim, 28, who runs Prestige Hair N Beauty Centre at Thomson Plaza, said he has been frantically calling up other banks about their merchants' scheme.

'It's the year-end season and we'll be rolling out promotions. Without credit card payment, how are we going to do business?'

The Sunday Times understands that merchants typically pay a fee of $100 to $400 annually for the use of a bank's credit card terminal. The bank may also get a commission of 2.5 per cent for each transaction.

Beyond credit card transactions, customers can opt to pay by instalments with the terminal.

In this case, the bank pays the merchant upfront on behalf of the customer. It gets a cut of about 4 per cent from the deal.

Some operators interviewed said this mode of payment is a lifeline for the industry as customers tend not to pay upfront for facial and massage packages, which can easily cost up to a few thousand dollars.

About 75 per cent of spa chain Rustic Nirvana's customers pay in monthly instalments, said its marketing manager, Ms Agnes Lin.

She added that more than half its customers are Citibank card holders. She expects the spa to lose some sales initially.

'It will definitely cause some inconvenience to customers who are used to paying with that card.'

Customers agree. Teacher Fong Kok Hoong, 36, who is paying about $200 a month for a facial package under a Citibank instalment plan, said he would have to find other ways to pay for packages he buys in the future.

The salon he visits has only a Citibank credit card terminal.

'I may have to pay cash upfront if I cannot sign instalment plans any more,' he said.

For Ms Lin, what worries her more, however, is how customers may view this episode. Already, the spa industry has been hit by bad press recently, after a popular spa, Wellness Village, closed down abruptly three weeks ago.

It left stranded about 240 customers, who had paid upfront sums ranging from several hundred dollars to $10,000.

When contacted, a Citibank spokesman declined to give a reason for the termination or say how many merchants are affected.

He said the bank exercises care in the choice of merchants it works with, based on a number of factors that include their financial standing, brand and reputation, and the commercial viability of the partnership.

He added that the bank regularly reviews these merchant relationships and may on occasion discontinue some.

He stressed that the recent termination of service was at the individual business level and is not specific to any sector or industry.

Some affected operators are taking the episode in their stride.

Ms Phyllis Tan, 52, chief executive of Beauty Express, said customers can still use their credit cards - including those from Citibank - to pay as she has several credit card terminals in her three salons.

Those using Citibank cards will have to pay in full.

'But if my Citibank customers want to pay by instalment, I'll just have to ask them to use or apply for another bank's credit card.'

This article was first published in The Straits Times.