Fees for paying by direct debit and credit card will be banned across the UK next year, the government has announced.
From 13 January 2018, merchants including retailers, service providers, local authorities and government agencies, such as the DVLA (Driving and Vehicle Licensing Agency), will no longer be able to levy a surcharge on consumers paying by card.
Surcharging is common practice with businesses ranging from takeaway apps to airlines charging people extra to make card payments. According to the government, in 2010, the total value of surcharges for debit and credit cards was an estimated £473 million.
The economic secretary to the Treasury, Stephen Barclay, says: “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 checkout 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.”
What’s covered by the ban?
The ban applies to all cards, including American Express, Mastercard and Visa, as well as to card purchases made using contactless technology such as Apple Pay and PayPal. It also covers purchases made both online and in store.
The rules are coming into force as part of the EU Second Payment Services Directive, although the UK government is going one step further in extending the ban to cover all methods of card payment, whereas the EU Directive only requires the banning of Mastercard and Visa fees.
As these rules will be written into UK law, it means the merchant needs to be based in the UK for the ban to apply. It is also means the rules will still apply when the UK leaves the EU.
Trading Standards will be responsible for enforcing the ban, and consumers should report any issues to it. The Competition and Markets Authority (CMA) has overall responsibility for Trading Standards, so it, too, can investigate any repeat offenders and decide on appropriate action.
Providers may up prices as a result
However, while the scrapping of surcharges is good news for consumers, one consumer expert warns that it could result in providers upping prices.
Guy Anker, managing editor of consumer group MoneySavingExpert.com, says: “Scrapping card surcharges is good news for the millions of consumers who would otherwise have been milked by companies which whack on unexpected charges at the end of the process – something that has been happening for years.
“But while it will make it easier for consumers to compare prices we expect some companies will raise prices for all to compensate for the loss, which could hit those who currently pay in cash.”