Business

Ban on 'rip-off' card surcharges to take effect

Companies are no longer allowed to charge customers up to 20 per cent more for purchases such as flights just for paying with a credit card
Josie Clarke

A BAN on "rip-off" surcharges levied by companies on customers who pay with debit or credit cards is coming into effect.

Companies are no longer allowed to charge customers up to 20 per cent more for purchases such as flights just for paying with a credit card under the new rules that take effect on Saturday, January 13.

However the ban comes amid concerns that consumers may see the cost of goods and services creep up, or additional fees added by retailers, as a result of the changes.

Takeaway firm Just East has already drawn criticism for introducing a 50p "service charge" on all orders after previously levying a 50p surcharge on debit and credit card payments.

Consumer groups have welcomed the ban, but are urging shoppers to report any retailers they believe are flouting the new rules.

The surcharges have been commonly added by businesses ranging from takeaway apps to global airlines on customers who pay by card or use other services such as PayPal.

The rules will also tackle surcharging by local councils and government agencies such as the DVLA.

Businesses usually say the surcharge is to cover the cost of processing a card payment.

It is estimated that surcharging cost Britons £166 million in 2015.

John Glen, Economic Secretary to the Treasury, said: "It's completely unfair for someone to be hit by a hidden fee just before they are about to make a purchase, so by scrapping these rip-off charges we are helping to give power back to the consumer.

"As we build a fairer society, this added transparency ensures buyers can make informed choices about how they spend their hard-earned money."

Gareth Shaw, from Which? Money, said: "This ban should finally stop consumers being penalised simply for using their card. However, people will be wary if it results in price increases, minimum spend limits or even cards being refused by retailers.

"The Government and regulator need to closely monitor the effectiveness of the ban - and the fees banks charge retailers for card payments - to ensure that it has the positive impact for consumers originally intended."

Helen Saxon, chief money analyst at MoneySavingExpert.com, said: "Scrapping card surcharges may be good news - hopefully it will mean an end to surprise charges at the end of a purchase, making it easier for people to compare prices of hotels, concert tickets and more.

"However, it may be that we see the amount that used to be charged in credit card fees popping up elsewhere, for example in booking or transaction fees, or even in the price of goods or services."

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