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Abolishing surcharges can’t come too soon

Stack of credit cards

Charges for paying by credit card are generally more reasonable now than in the past, but a Which? investigation found that they still vary a lot. Have you been stung by a credit card charge recently?

Being charged for using a credit card when making a payment is long-standing gripe for many consumers. As some of you will know, Which? has been campaigning against these surcharges for years.

We found that while some companies have cut their fees, we’re still finding others charging 2% or more – despite some of their costs being cut.

A brief history

In 2011, we made a super-complaint to the OFT against the excessive surcharges companies charged for paying by card. It resulted in the government banning companies from charging more than it costs them to process a card transaction.

And when we felt companies were still charging too much, we persuaded some of them to reduce their fees.

Why do companies charge at all?

Of course, there can be costs to a company for processing a card payment. These costs include an ‘interchange fee’ between banks, but last December these fees were cut for Visa and Mastercard. As a result, we expected the surcharges being passed on to consumers to be cut too. For example, Easyjet has cut its fees from 2% to 1%. But that doesn’t seem to be happening across the board.

It’s hard to know exactly what it costs every business to take credit card payments – and it might cost some companies slightly more to process credit card payments than others. But when customers can’t see what these costs are, they might question why one company charges 3.5% while another is only charging 1%.

This could soon be a thing of the past (mostly)

The UK government is planning to implement a new Payment Services Directive that will ban all surcharges for Visa and MasterCard debit and credit cards (but not American Express). The latest expectation is that it should come into force as early as 2017.

In the meantime, we’d like to hear from you. Have you come across any companies with high credit card surcharges recently?

Our full investigation into credit card fees can be read in the August edition of Which? magazine.


I welcome abolition or reduction of charges because I prefer to pay by credit card to benefit from Section 75 and other consumer protection as well as the delay before my credit card bill is paid.

If there is a credit card surcharge I pay by debit card. I do check if there is a credit card surcharge but in my experience, those charging a surcharge do make this clear.


I don’t see why there should be a surcharge to the customer for using a credit card. It doesn’t happen in shops and they also have a shopfront to support. The devil in this particular detail is the interchange fee charged by banks in addition to the merchant processing charge. I should like to know the reason why it should be percentage-based. There might be a good reason [e.g. it would otherwise be disproportionately high for low value purchases], but then I think a more appropriate level might be 0.5% rather than 1% or more, or perhaps the fee should taper. I avoid CC processing charges so far as possible but for many people there is virtually no alternative if they need to spread the cost of a purchase over two or three months. The S.75 protection that comes with a credit card payment is also a valuable safeguard, especially if dealing with an unknown company or if an expenditure is critical, but it comes at a price. The absorption of credit card fees in the overheads of retailers and service companies will impact on prices across the board for every consumer, of course. It would not surprise me if the banks took the opportunity to raise the interchange fee as it would then be well and truly concealed.


To me the advantages of using a credit card are the interest free period it gives before having to settle, consolidating my payments under one account, and the protection it gives against a problem purchase. I have never yet had to use the latter but it does give confidence, particularly in choosing an online seller. However, the interest free and account administration costs money, and the credit card company makes a profit. So costs are involved that consumers end up paying.

I presume the seller pays a fee whenever a credit card transaction takes place. I make the assumption that for retailers and many others this is hidden in the price of goods and services that everyone pays, whether they use a card or not. For others a fee is disclosed that , with some, (my local authority, DVLA as examples) can be avoided by paying with a debit card.

So should we have full transparency – where all sellers disclose the fee. and for those who do not pay by credit card, why should they not see a slightly reduced price? I’d like to see someone show exactly where all the charges are in credit card transactions – bank, credit card company, retailer, service provider – and then have a reasoned proposal as to how these are best recovered, without those paying by other means not subsidising those who use a c c.


When credit cards were first issued in the UK in the late 1960’s they were seen by retailers as a boost to trade and a way out of their hire-purchase schemes with costly overheads, so they were happy to absorb the costs of card transactions. Shops that accepted credit cards were seen to have a commercial advantage over those that didn’t. It also improved mail order confidence. Not being a Barclays account holder I was not entitled to a credit card until the Access Card was introduced in around 1972. It arrived unsolicited as a sort of present from the Midland Bank with whom I had a current account. The Consumer Credit Act soon followed in 1974 in order to regulate the industry and it brought in the Section 75 default protection. In their early days, credit card payments were very much a manual operation requiring traders to take their payment slips into their bank for processing. Although payment processing for both traders and borrowers was heavily computerised it was much slower than modern systems [direct debits were slow to catch on and most customers settled by posted cheque or an over-the-counter payment using Bank Giro] and most back-office processes were paper-based. Despite enormous efficiency gains the fundamentals for the consumer haven’t changed much even though transaction volume and turnover have grown phenomonally so the costs of operating a credit card account remain significant. I would have expected the digital revolution and on-line transaction systems, together with the economies of scale, to have borne down on these costs and I agree with Malcolm – it would be very useful to have a breakdown of the costs and charges together with a justification in each case. We should not overlook the interest rates on deferred settlement which, in relation to base rates, are stratospheric; I expect they are profitable as well.


I would like to see new credit card holders required to set up a direct debit to pay off their card balances at the end of the free credit period. I suspect that this could save many customers from getting into the habit of living in debt and paying high monthly interest rates.

Thanks for the history, John. I had not realised I had obtained an Access card so soon after they were launched. I remember when the card was put onto a manual machine that transferred the embossed information onto a form with duplicate sheets, one of which was given to the customer. Chips and pins were from the fish shop and haberdashers down the street and security codes were something used on bike locks. There are still a few of the manual card machines in use.


I do not mind paying the cost of any fair or actual Credit card transaction but what gets up my nose is the charges of Travel firms who will charge you 2% fee or similar of your total travel transaction that then ups your costs and in no way is a true reflection of the actual Credit Card transaction cost, more a case of putting extra profit into the coffers of the Travel company. That really needs to be looked into and rectified by law if necessary.


If the travel company is having to pay the bank interchange fee of at least 1%, plus the merchant processing charge at whatever rate that is, you can see where the 2% comes from. As I wrote above, I think it is far too high but until the interchange fees are reduced this problem will remain. The travel industry does not endear itself to its customers but, still, we wouldn’t want to book a holiday with a firm operating on a knife edge. Credit card payments to the travel operator, though, are gilt-edged as they are real money in the bank with no risk of default or bad debts and for many holidays they are received some time before any payments are made to the airline and hotel.

Derek Conway says:
22 July 2016

Its only a small thing but when visiting my local fish and chip shop very recently I ordered a take away fish and chips Total £9.90 I wanted to pay by my contactless visa debit card. The assistant showed me a small notice behind the counter. It said that any payment by card under £15.00 would be subject to an 80 pence surcharge. That meant that they wanted almost 8% extra on my £9.90 portion of fish and chips. Hunger overcame my decision to walk out.