/ Money

The death of the rip-off card surcharge

Paying on card

Thank you to over 40,000 of our supporters who backed our campaign to end rip-off card charges. These sneaky fees for using credit and debit cards finally get the chop. Have you been stung by a card surcharge when making a payment?

A long-standing Which? campaign had a big win today as rip-off credit and debit card surcharges have been banned once and for all by the government.

Today’s announcement from the Treasury is an extension of the revised EU Payment Services Directive (PSD II). The ban will bring an end to retailers adding extra charges at the checkout for all card payments, including credit and debit cards as well as digital payment services like ApplePay and PayPal.

Sneaky card charges

Back in March 2011, we used our legal powers to submit a super-complaint to the Office of Fair Trading (OFT) to force an investigation into card surcharges. Our super-complaint came after we found that these charges were often far in excess of what it cost companies to process card transactions.

The OFT investigated the issue and upheld our complaint. It then began to look into what could be done to stop unfair debit and credit card surcharges. As a result, in December 2011, the government agreed to take action and confirmed it would ban excessive surcharges. This ban came in to force in April 2012.

But these rules meant that surcharges weren’t banned, but must reflect the cost incurred to the firm for processing the payment.

We estimated that it would be no more than 50p per transaction for debit card payments or 2% of the total transaction price for credit card payments. While it’s difficult to gather a full picture of how much card surcharges cost each and every business, it makes the justification to add charges of up to £10 for bigger transactions, such as for travel bookings, somewhat questionable.

And while some companies have dropped or reduced their charges over recent years, there are still many that haven’t. For example, an investigation by The Times last year revealed that Queen Mary University of London charged 2% on tuition fees in certain circumstances, Eurostar a £3 flat fee and Everyman Cinema 75p per ticket.

A real ban?

This new blanket ban on surcharges for all payment instruments will come into force in January 2018, but the question now is whether or not companies will absorb the cost and not pass them onto consumers in other ways.

Have you been charged unexpected fees for paying via credit or debit card? Do you think this ban will help you?


Businesses will just up their prices to compensate for any lost income from card charges.

20 July 2017

Yes, airlines and insurance companies add fees regularly!

Ross says:
20 July 2017

The government itself does exactly this by charging for credit card use when paying for car tax

I agree with Alan Francis, the EU directive should have insisted the banks reduce their charge in line with the charge for debit cards which is 20p – 30p per transaction, that would keep the consumer and the business owners happy. The banks are already making a healthy profit on credit cards by charging their clients 16% – 35% and more sometimes.

Eric Barker says:
20 July 2017

When buying a ticket for instance online, there is no other option but the card payment, so if it’s the only method you can use, why is there a charge for it anyway ?

Good point , Eric – it should be incorporated into the selling price [unless the surcharge is a flat rate on an order irrespective of the number of tickets purchased]. But I expect the sellers have to maintain the fiction that there is a face value on the seat whereas the ticket price for each seat goes up and down with market demand and proximity to the event. Ticket pricing is a bamboozling contrivance that the entertainment industry has been concocting for generations but which has reached its apogee following the introduction of highly sophisticated computer software that effectively manipulates the market and denies the market full knowledge. The market is therefore an imperfect one: opaque and obscure and riddled with distortions . In its present form it is supported by the government because it will not dare to correct it. In my opinion every level of the industry is in it up to its neck despite the occasional protestations to the contrary by certain artistes.

Catherine says:
21 July 2017

DVLA won’t even accept debit cards over the phone so a credit card with surcharge is only way available-to make life easier!!

Ian says:
22 July 2017

The current arrangement sees the card processing fee specified as a separate and transparent cost. Treasury rules limited the retail charge to no more than the actual cost incurred in processing the payment.

In future, the card processing charge will now be built into the cost of goods and services purchased. Those who pay by cash will be subsidising this.

Presumably retailers and traders will no longer be able to offer a cheaper deal for cash?

Richard Thomas says:
22 July 2017

Dear Lauren,
While the banning of charges for use of credit and debit cards is good news, perhaps now you can turn your attentions the the diabolical costs of taking debit and credit card payments levied by the banks on businesses.
I own a bar in London. Only the one, not a chain, and the charges we have to pay for accepting credit and debit cards is seriously impacting our ability to survive.
In the last 2 years we have seen credit/debit card payments leap from 20% of our takings to 70% of our takings. As a result, we have had to rent an extra card machine for £50 a month. This takes our card machine rental up to £1200 a year.
Then there are the costs levied against us by the banks for accepting these payments. These range from 30p per transaction for some cards to 3.5% of the total transaction for others, and it is costing us thousands of pounds a year, when we do not have thousands of pounds a year to loose.
We have to accept card payments, but why should the banks now profit from my hard work, when I barely profit myself?
It was already bad enough when I was mostly working to pay insane amounts of rent, business rates and taxes. Now I’m working for the bank too, and it’s diabolical.
People complain that small businesses are disappearing and the high street is being taken over by corporations and chains, but as long as people choose to use credit/debit cards in stead of cash, and as long as banks are allowed to charge these rip off fees, small businesses will continue to disappear until there will be nothing but faceless chains and corporations left, and then we will all be poorer.
So far, we have not added a charge for using credit/debit cards, but if my bar is to remain viable, I have no choice but to increase the price of my drinks. The end result of that is that I loose and my customers loose, but the banks win.
If you want to help customers and small businesses, please campaign to end the banks right to steal my profit just because customers are to lazy to go to a cashpoint machine.

Phil regan says:
22 July 2017

When I order home heating oil or pay for car or house insurance I am always charged for using a credit card but not a debit card.

Unfortunately, Section 75 doesn’t always apply. I booked a holiday at a “Hotel and Spa” in Ireland that I’d stayed at before, only to find that the leisure centre/spa had been closed down since booking. The hotel refused to take responsibility for their failure to notify me so I tried to claim under Section 75, only to find that the protection does not apply when using a credit card to pay a third party – the booking agent. That business is based in Brussels and their terms and conditions also prevented my refund.
I always pay by credit card for anything costing more than £100 in the expectation that if things do go wrong, I’m not out of pocket; but bear in mind there are gaping gaps in this protection.

This is not a victory for small business, at all. We pass on the, ridiculous, charges that are levied at us from those who wish to use a credit card – By all means, enjoy your air miles, free insurance, cash back etc but don’t expect it to be free! We swallow the debit card charges and accept cash and bank transfers.

This move could cost us over 10k-20k a year which we will need to pass on in some way or another. Many businesses will need to do the same.

Does this ban apply to those outside the EU – Are we able to apply a surcharge to somebody with a US card, for example? I’ve tried to read the legislation but quite seem to find a definitive answer..

I am a bit late, but this is excellent news.

A few weeks ago we were going to buy something over the internet. It had been on a very good special offer but we missed out but decided to buy it anyway. When we went to pay, they were going to add 3% CC charge. To cut a long story short, to avoid paying the charge, they added on £40 delivery charge. We did not complete the transaction.

Andy says:
2 August 2017

Great, thanks a lot. As a small business owner who is paying through the teeth for the ‘privilege’ of accepting cards this is hardly what I would call a victory. I’m paying a monthly charge for a payment gateway, another monthly charge for a merchant account plus a monthly charge for being PCI DSS compliant. All this adds up to a big chunk out of my monthly income before I’ve even accepted a single card transaction! It’s another 15p per transaction on top of these monthly costs, and if I had an in-store card machine that would be at least another 30 quid per month rental. And there’s an initial £99.00 (plus VAT) set up charge as well.

While I’m certainly against businesses profiteering on card transactions by slapping large fees on top, I don’t think it’s at all unreasonable to charge 40-50p per transaction to help offset these costs.

If Which? had really wanted to do both consumers and small businesses a favour they would have targetted the rip-off credit card companies and banks for charging extortionate fees for credit card transactions. In this world of electronic transactions the actual running cost to them is minimal, there is no reason to charge such high fees and to add insult to injury they charge a fee for PCI DSS compliance – even though we the merchants are the ones doing the work and providing the certification!

The only outcome of this so called ‘victory’ will be that more and more businesses will simply stop accepting cards as it’s just too expensive.

I agree with you, Andy, that this move is a mixed blessing, Traders must believe it profits them in the long run to acccept CC card payments otherwise they would stick to cash and cheques – and give those a wide berth. One of the things to bear in mind is the value of the guarantee a trader gets that the payment will be honoured even if the customer defaults on repayment to the card issuer. That is a form of insurance that must be worth something in the retail equation. They also bring forward sales that would not otherwise not take place for some time and that has a value as well.

Andy says:
4 August 2017

Thanks for the reply John. As I trade online only, cash is not an option. I do offer cheque and BACS payment options but very few customers utilise these as it requires more effort on their part (and I might add that banks have already threatened the phase out of cheques so eventually they won’t be an option either). In this day of “convenience”, if it takes more than a few clicks of a mouse then people just won’t bother, they’ll head over to the likes of Amazon or eBay and buy the same thing for a ridiculously low price that I just can’t meet and then pay by credit card so it feels like they’ve not actually spent any money. With the huge buying power the big boys have they can buy at rock bottom prices, sell at a discount and still make enough profit to absorb the cost of credit card transactions.

Regarding the guarantee of honouring payments, that is not the case at all. A credit card transaction takes several days to go through and during that time the payment can be reversed by the bank at any time for any reason. When a customer makes a credit card purchase and it says “approved”, it can take up to a week for the money to appear in my account, however the payment can still be denied by the bank even though the customer thinks it’s gone through. Meanwhile, the customer gets annoyed if I don’t ship the item straight away because they’ve “paid” for it! The only guarantee is that banks will continue to make obscene amounts of money while small businesses (and ultimately, consumers) will suffer.

There really is very little benefit for a small business to accept cards, the only reason we feel we have to is to try and remain competitive and offer as many payment options as we can for the customer, otherwise they’ll just go elsewhere. I don’t believe this is a mixed blessing at all, it is lose lose for both business and consumer alike. If we don’t put a stop to this rampant profiteering by the big corporations that has become the norm these days then eventually there will be no small businesses, and then we’ll all be very sorry indeed..

Andy, it is interesting to hear your side as an on-line trader.

Another side are the small High Street traders who are disappearing as they cannot compete with internet traders. I don’t know of any that make a charge for paying by credit card. Even our local newsagent and butcher accept credit cards although we try to pay them with cash that they still have to pay to bank.

Thank you Andy. While it can take up to a week for the credit card transaction to be processed, once that has happened you do get the payment for the sale even if the buyer subsequently defaults on his or her credit card account.

I can understand that if you can’t take cash because that is not practical with distance selling, and customers will not use the faster payments system or send you a cheque , then you have no alternative but to accept credit card payments. Since all your competitors probably do so as well you are not at a commercial disadvantage.

I hesitate to suggest it . . . but you could join the Amazon Marketplace and have them do the dirty work for you.

Andy says:
4 August 2017

Agreed, and I was one of those small high street traders. I started out online and then opened a shop in 2010 but the overheads were enormous and I had to close it after a couple of years and revert to online only. I hate to keep harping on about “greedy corporations” (admittedly, they are a sore point with me!), but the amount of charges levied on us by the utilities companies were nothing short of legalised extortion. And once you enter into a business contract you can kiss goodbye to all the rights you enjoy as a consumer. It’s shut up and pay up, or go bust….

I have no recent experience of using Amazon, but they and other large companies seem to be able to deliver goods quickly even when paying by credit card. For example, rail tickets are often delivered the next day. Have the larger companies a special arrangement that overcomes the delay referred to by Andy?

Andy says:
4 August 2017

Well that’s true, but the same can be said of most payment methods. If a customer doesn’t have any funds in their account after their cheque to me has cleared then it’s of no consequence, I’ve already been paid. If the funds aren’t there before the cheque clears then the cheque bounces. Similarly, if the customer defaults on a payment after the bank has processed their credit card payment to me it doesn’t affect me, I’ve already got the money. However, if the default occurs during the payment clearing process then the payment is reversed and I get nothing, even though it may already have been “approved” on checkout.

Don’t even get me started on the fees for selling on Amazon and eBay! They take more than their pound of flesh, and those are on top of the card fees.

Ban on debit card surcharges – will this apply over the counter in shops and taxis? My local shops charge 50p, one pound or more, and minicabs charge £2 on top of the £6 minimum fare, to go 500 yards.

Sadly the wording of the UK legislation produced in response to the EU Directive is too wooly and weak, and there is no indication of who will police the requirements, or how they will do so.
I am certain that the majority of organisations that apply such card surcharges will merely change the name to “booking fee” “service charge” etc, or else raise their prices to include it.
Organisations such as HMRC and other bodies will continue to charge and argue that the requirements do not apply to them.

Will this apply to airline booking charges where a surcharge is added for paying by credit card?

A deeply flawed proposal from the EU, similar to the flawed decisions on car/co2 emissions, once again politicians have chosen the quick fix that will satisfy no one and achieve nothing. We all know that the primary culprits of rip off fees were the Companies that wish to show a low fee on there sales, and then load the supplementary fees, Holiday Companies and Low Cost Airlines being the prime candidates. Businesses have to pay fees to take cards, that will not end. The end result will be that all consumers will now pay an extra cost to cover these fees. I am advising my clients that except cards to commence charging an admin fee on all sales.

I have just paid the balance on my package holiday, and had to use a debit card payment. The travel company will only accept debit card payments now that the credit card surcharge has been banned. I think this will become standard practice with all kinds of smaller retailers, and thus we, the consumers will be worse off, because we lose the financial protection afforded by credit card payments.
This is a poor piece of legislation, removing a fee, but as a result removing an important consumer protection. Did our legislators, and the organisations who campaigned for it, includng CA, not see this coming?