It used to be, that if you wanted to pay via credit or debit card, you’d expect a surcharge; a small amount added to your bill for the convenience (and to cover companies against the bank’s card charges).
Those days are over, according to the Government. Now, you pay exactly what you should pay, with no hidden charges that come as a nasty surprise to many of us.
Ok, those days aren’t exactly over just yet. The new rules come in to effect in January 13th 2018, banning businesses from card surcharges. According to Treasury estimates, in 2010 consumers paid out an incredible £473 million on additional card charges – money that the Government says it wants to put back in people’s pockets, and back into the general economy.
The original rule comes from a European Union directive, the Payment Services Directive, that totally bans extra charges for payments made by Visa and Mastercard. However, the UK Government has widened the ban to include payments made through Apple Pay, Paypal and America Express too – a move that was hailed by consumer rights campaigners.
Coming under specific fire were online fast food delivery businesses and airlines, who have been singled out by the Treasury for their surcharges. For instance, both Just Eat and Hungry House add a 50p card charge to your bill (so, if you have a £10 takeaway, you’re paying 5% extra). Even the DVLA will charge you an extra £2.50 for ordering a driving licence on card.
And how much do you suppose banks charge retailers for processing card transactions? Around 10p to 20p for debt cards and while credit cards are charged at around 0.6%. Essentially, then, companies are overcharging you for using your card. The Government had already banned ‘excessive’ charges back in 2012, and this new ban serves to strengthen that position.
But the new changes might not be all good news for customers, with many believing that companies will simply increase their prices to cover the lost revenue. James Daley, managing director of consumer group Fairer Finance said:
‘Maybe they will bump the price up. That’s fair game. You have to take customers’ money somehow. And it’s not reasonable to add that cost on at the end of the process. Why not put it in the headline price?’
Consumer magazine Which?, on the other hand, believes that given how small charges are on debit card use, businesses should take the hit. Pointing to examples such as Virgin which scrapped flight surcharges, and British Airways, which reduced its charge from a £5 flat-rate to 1% of the sale, they claim that no increase in prices is necessary.
The problems rest, however, with smaller businesses. Consumer groups already believe that many SMEs are illegitimately charging more for card use than they should be, and once the new ban comes into effect, they’ll be forced to put up their prices since they’re unable to take the financial ‘hit’ that large companies can. And, given how popular card usage is these days, they’re not in a position to simply accept cash only.
With less than six months until the ban receives a nationwide roll-out, it remains to be seen whether the rule will change the way we pay. But at least there won’t be any more nasty surprises lurking on our latest bill.