Rip-off credit and debit card fees to be banned from January

Businesses will have to stop charging extra fees for taking payment by credit and debit card from next year.

New rules banning companies from hitting customers with extra fees for paying by credit or debit card have been announced by the Government.

Credit and debit card surcharges are estimated to have cost us a whopping £473 million at the checkout in 2010.

But from 13 January 2018, firms will no longer be able to penalise shoppers that pay by card or other methods like PayPal, online or in-store, with these rip-off fees.

The rules now

Currently, under rules introduced in 2013, retailers can charge customers what it costs them to process a debit or credit card payment, but they shouldn’t profit from this.

However, shoppers still face a nasty surprise when they come to pay with fees typically around 2% or flat fees of no matter how much they spend.

While the fees sound small they really add up. On smaller purchases, fees can account for as much as 20% of the bill.

Since the change, some firms have chosen to absorb the costs, but others have continued to squeeze shoppers at the checkout.

Some of the worst offenders are airlines but local councils and Government agencies are also guilty of the practice.

Flybe, for example, charges 3% on credit card and PayPal transactions.

While Ealing Council charges residents a 2.5% surcharge for paying their Council Tax bill by credit card and the DVLA charges motorists a £2.50 on all transactions made with a credit card.

Take a look at: Debit card payments: who is charging rip-off fees and why?.

What’s changing?

Under the new rules, all surcharges for payments will be banned.

That means companies will no longer be able to charge for card payments including American Express or alternative payment methods like PayPal.

The rules will apply to any UK firm that is selling to UK shoppers.

The move is part of the implementation of the EU Payment Services Directive, which sets out changes EU governments have to make by next year.

The change will also be part of UK law, so will continue to operate after Brexit.

Will you save money?

The ban is likely to save shoppers making expensive purchases the most money.

For example, right now a flight for a family that costs £3,000 with Flybe would set you back £90 if paid for by credit card.

However, it’s possible that some firms will just raise prices to cover the costs of processing credit card, debit card and other payments.

While smaller firms that will have to absorb the costs may have to stop accepting cards altogether.

However, the Government has previously capped the costs that businesses face for processing card payments, and says it will engage with retailers to see if it can offer further help.

Stephen Barclay, the Economic Secretary to the Treasury, said: "Rip-off charges have no place in a modern Britain and that’s why card charging in Britain is about to come to an end.

"This is about fairness and transparency, and so from next year there will be no more nasty surprises for people at the check-out just for using a card.

"These small charges can really add up and this change will mean shoppers across the country have that bit of extra cash to spend on the things that matter to them."

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