Which? challenges unfair card charges
Consumer group Which? is launching a super complaint against retailers charging unfair surcharges.
Surcharges - or fees - are charged when consumers use a credit or debit card to pay for goods. However, Which? claims the charges are well above what it actually costs the retailer to process the payment.
It is issuing a super complaint to the Office of Fair Trading (OFT), which now has 90 days to assess it.
Which? says it costs the retailer no more than 20p for a debit card transaction or a percentage of a credit card transaction, no more than 2%. But it says surcharges are often a fixed amount so you could end up paying more than the true cost.
Low-cost airlines are among the worst offenders, with some charging a fee per passenger, per leg of the journey, in spite of the fact that they only have to process one transaction.
Which? chief executive, Peter Vicary-Smith says there's simply no justification for excessive card charges.
"Paying by card should cost the consumer the same amount that it costs the retailer," he says. "Companies shouldn't be using card processing costs as an excuse for boosting their profits.
"Low-cost airlines are some of the worst offenders when it comes to excessive card surcharges but this murky practice is becoming ever more widespread, from cinemas to hotels and even some local authorities."
Which? wants the retailers to be made to introduce upfront costs whereby they tell consumers if they charge for purchasing on credit or debit cards, and if so what the cost is. It says the cost of the charge to the consumer should be the same as the cost to the retailer and, as the cost of processing a debit card is small, retailers should absorb this fee.
The UK Cards Association is backing the super complaint.
"We called for government action to curb excessive surcharging for card payments ahead of the last election," says Melanie Johnson, Chair of The UK Cards Association. "It is high time customers were given a voice where the true cost of what they are buying is made clear to them.
"We are happy to support Which? when they launch their super-complaint as it is not good enough for some businesses to generate profit by imposing inflated surcharges when their actual card processing costs are substantially lower."
Are Which? right to challenge surcharges? Leave you comments below.
A complaint made in the UK by a government-approved watchdog or consumer organisation on behalf of consumers which is then fast-tracked by the Office of Fair Trading (OFT). For a super complaint to be valid, it has to be about a “market feature, or combination of features, such as the structure of a market or the conduct of those operating within it, that is or appears to be significantly harming the interests of consumers”. In March 2011, the OFT received a super complaint from consumer watchdog Which? asking the regulator to investigate excessive surcharges imposed by issuers of credit and debit cards.
Issued by a bank as part of a current account and, in a nutshell, serves as electronic cash. Unlike a credit or charge card, where you get an interest-free period before you have to settle the bill, the funds spent on a debit card are withdrawn immediately from your current account. Unless you’ve arranged an overdraft, if you don’t have the cash in the account, you can’t spend it.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.