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Surcharges for paying by card will be banned from next week

Charging more to use a credit or debit card will become illegal from 13 January 2018

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The end of rip off fees for paying by card is almost here, with the government banning card surcharges as part of a raft of new financial regulation coming into effect on 13 January 2018.

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What are card surcharges?

Card surcharges are whenever a business charges you a premium for paying by debit or credit card.

You’ve probably noticed ‘credit card fees’ added at an online check-out, or a 50p charge to use the card machine at a corner shop.

Why have they been banned?

The government felt compelled to legislate when it came to light that too many businesses exploit customers by adding on (what the Treasury itself has called) “rip-off” card surcharges, that do not reflect how much it costs a company to process your card payment.

When a customer pays by card, businesses have only been paying card payment providers (such as Visa, Mastercard, American Express) 0.2% and 0.3% of the value the transaction, since a 2015 directive from the European Union capped ‘card interchange fees’.

For example, if you bought a £300 flight with a card, the airline company only needs to pay the card payment provider (Visa or Mastercard) £0.90 (0.3% of £300) to process the transaction.

Will retailers just put prices up?

An investigation the Daily Mail reported that some companies are planning to simply increase their prices or introduce ‘service charges’.

They report that whilst take away company Just Eat is scrapping the card surcharge, it’s introducing a new ‘service charge’ of 50p for every customer (including those paying with cash) because it ‘ensures fairness for all’.

What about minimum charges for using a card?

Some small shops or pubs have a £5 or £10 minimum spend before they will accept a card. This will not be illegal under the new directive, so expect it to continue.

However, as more of us switch away from using cash retailers may discontinue this practice, as it will risk them losing business.

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