Beware of rip-off card fees!

Companies and councils use `plastic piracy' to con customers who pay by credit or debit card...

Greedy companies and councils are using hidden charges to cheat customers paying by credit card or debit card. What’s more, these charges are rising, according to a new survey from magazine Which? Money.

Yet another British rip-off

In several European countries -- including France, Germany, Italy and Portugal -- extra charges for paying by credit or debit card have been outlawed. However, here in the UK, these additional fees are allowed -- and many organisations use them to make outrageous profits by exploiting consumers.

The problem is caused by the fact that companies and other organisation pay ‘merchant service fees’ to MasterCard, VISA or American Express for use of their payment networks. In the past, merchants would absorb these fees themselves but, increasingly, they now pass them on to consumers in the form of surcharges for paying by card.

These merchant fees vary from company to company, and largely depend on the volume and value of transaction put through, plus exposure to card fraud. Thus, big businesses pay much lower merchant fees than small firms, which can be charged 2% to 6% per credit-card transaction.

For payments by debit card, merchant fees can be under 1p per transaction, as these don’t require bank funding in the way that credit cards do. Nevertheless, some firms have the cheek to turn, say, a 5p charge into a £5 surcharge.

THE HALL OF SHAME FOR CARD FEES

1) Airlines

Now, which companies rely on ‘ladder pricing’? In other words, they start off with low prices and then stealthily add on charge after charge after charge until your final bill is several times the original price?

Yes, you’ve guessed it: budget airlines are among the worst offenders in the ‘great card con’, with Ryanair taking first place in our Hall of Shame:

* PPPF = per passenger, per flight

How on Earth can Ryanair boss Michael O’Leary justify charging a £60 surcharge for paying by debit card for six return flights? With the true cost of this transaction likely to be under 10p, Ryanair makes a massive profit from processing card payments. In fact, I’m willing to bet that the budget airline makes more from card charges than it does from flight fees.

In contrast, Virgin Atlantic charges 1.5% for credit cards and nothing for payment by debit card, and bmi, Emirates and Thomas Cook levy no extra charge for debit-card payments.

Read Avoid budget airline fees for tips on how to ensure you don’t have to pay these rip-off charges!

2) Travel agents

Although most major travel agents and tour operators don’t charge for payment by debit card, their charges for credit cards are hefty:

As you can see, travel agents like to add 2.5% to your bill for paying by credit card. For a £4,000 family holiday, this could mean forking out an extra £100 at Co-operative, Saga Holidays and Thomas Cook.

Even worse, both Co-operative and Saga Holidays would charge a whopping £500 for a £20,000 cruise, with Kuoni’s charging £400. For the same trip, Lastminute would add on £15; Thomas Cook £50; and First Choice/Thomson £70. Surely anything more than, say, £25 takes the Mickey?

3) Ferries and trains

Here’s how transport companies plunder passengers’ pockets:

Ferry companies like to add a £5 charge for paying by debit card. However, DFDS charges 2.5% of the transaction value, with this fee capped at £25. Likewise, the £3.50 charge levied by online rail-ticket retailer thetrainline.com is over the top. After all, a rail ticket costing £3.50 would double to £7 were it bought via Trainline.

Of course, this isn’t the only rip-off you need to watch out for when travelling by train. Read The six biggest train rip-offs! to find out about the rest!

4) Cinemas

With two children at primary school, I’m a frequent visitor to local cinemas. However, I refuse to be fleeced by these online charges, so I always book and pay in person:

By booking online, I save the cinema both time and effort. Hence, why should I be charged, say, an extra £3 for booking four tickets online when I’ve done all the work?

Get your own back and screw the cinemas over instead – read Nine ways to enjoy movies for less.

5) Councils

Amazingly, even local councils and government departments are involved in this to scheme to scam the public.

Which? Money found 55 councils that levy additional fees for paying by credit card, including paying Council Tax bills. Twelve councils add 2%+ to bills paid by credit card, but some (such as Bath and North East Somerset) charge 3% on top. Two councils even have the nerve to charge for debit-card payments!

Even the DVLA (Driver and Vehicle Licensing Agency) gets in on this act, as it charges £2.50 for using a credit card to buy a tax disc (Road Fund Licence).

Find out  how to slash your council tax bill.

This is plastic piracy

Clearly, these fees are neither reasonable nor realistic in these credit-crunched times, yet they have been rising steeply in recent years. Is it fair and sensible to apply 100%, 200%, even 400% mark-ups to the price of goods and services, even when they’re booked and paid for online or by telephone?

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• Tony Levene writes:

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Furthermore, although banks charge per transaction processed, far too many companies charge per ticket. For example, paying for five return tickets in one go can mean paying 10 charges, even though the payment processor treats this as one transaction and thus levies a single fee.

What’s more, Which? Money found that retailers pay a typical fee of 0.1p per transaction by debit card, and 0.8% for credit cards. In many cases, these are a tiny fraction of the costs levied on consumers.

Time for a coalition crackdown

In my view, this seedy swindle needs to be stamped out as soon as possible. The only reliable way to do so is to introduce legislation to ban profiteering from card surcharges. In other words, the law should be changed to allow retailers and other organisations to pass on core payment-processing fees, but with no extra charge on top.

In short, there must be a ban on making any profit -- however small -- from these card surcharges. Only then can consumers be treated fairly in ‘rip-off Britain’. In the words of VISA Europe: “We are completely opposed to the practice of consumers being made to pay for using a card. Such practice should be outlawed.”

How to dodge this scam

Until the law cracks down on these crooks, we need to watch out for these cheating charges. Here’s what you can do:

• Use a debit card: the most outrageous charges are levied on credit cards, so stick to using your bank card (Switch/Maestro, VISA Delta or VISA Electron).
• Pay in person: if it’s convenient and cost-effective, dodge these fees by paying in person.
• Vote with your feet: when presented with a ridiculous fee for paying by card, refuse to pay and cancel the transaction. Instead, tell the firm that you’re taking your business elsewhere until their charges become reasonable.
• Complain to your MP: Members of Parliament are fed up with banks ripping off the public. By writing to our MPs or Business Secretary Vince Cable, we can start a campaign to end this plastic piracy!

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