Time to say goodbye to ‘rip off’ surcharges

Just one clarification. Personal debit cards do indeed cost a pittance to process, but ‘Business’ or ‘Commercial’ debit cards are charged pretty much the same as credit cards, i.e. somewhere between 1.2% and 2%.

I know someone who is very senior in the payment card industry, who confirmed that the cost of processing to them is exactly the same as for personal debit cards, and the reason for the higher charges is ‘because we can’.

Also, Cardholder Not Present surcharges have been increased recently, so expect to pay a higher surcharge if you’re not there to enter you PIN.

I’m a small business owner, and my card charges are entirely in line with the new rules. I don’t charge for personal debit card payments, and I charge 2% for UK credit and business debit cards, and 3% for non UK cards of all types. Some months I win by a few quid, other months I lose by a few quid.

I get charged a 7% fee on credit/debit card transactions by an estate agent – will this new ruling change that?

The Department for Business, Innovation and Skills has published guidance on the Consumer Protection (Payment Surcharges) Regulations 2012. There are several points of interest:

On page 5, it is confirmed that government departments such as the DVLA are excluded from the Regulations.

On page 13 under “Aggregation and averaging of costs”, the guidance worryingly suggests that DVLA-style flat fees by commercial businesses on credit card payments would not fall foul of the Regulations. Therefore although the actual cost of processing a credit card payment is a percentage, a business could charge a flat fee as an average across all customers, irrespective of transaction amount. This seems remarkably unfair against customers with small transaction amounts, as will remain the case with the DVLA. I believe that BIS has misinterpreted Article 19 of the Directive, in that any costs should relate only to the transaction concerned (i.e. marginal cost + average fixed cost) and should not be inflated above cost in order to subsidise other higher-spending customers’ transactions.

On page 13 under “Discounts for particular means of payment”, it covers energy suppliers and confirms that any discount or surcharge must cover the cost saving or cost to the supplier. Therefore a difference in the price of the energy consumed based on payment method would breach the Regulations. I hope that enforcement action will be taken swiftly against energy suppliers, nearly all of whom operate excessive differences is prices according to payment method. There is no reason for those paying by monthly standing order to pay more than those who pay by monthly direct debit for example. One could also argue, although less strongly, that those who pay by bank transfer on receipt of their bill should likewise pay the same as those who pay by monthly direct debit.

I have yesterday paid the outstanding balance for my holiday with ‘On The Beach’ I was offered either 2.95% for creditcard or 1.95% for debitcard Customer service girl assured me there wasn’t a facility to pay by cheque and they were not breaking the law as they were going to start being fair with charges later this year. Its not a massive charge I admit but is it legal?

Well done Which? – but I feel this is not the correct answer to the problem. There are two basic issues here.

Firstly, the ability to pay a consideration is an essential element of any contract for the supply of goods or services. It is in no way avoidable or optional. It is up to the vendor to determine in what forms they will accept payment, but I can’t see why they are justified in surcharging ancillary forms of payment, simply because it costs them more to process that particular type of transaction. There is a very simple decision here that the vendor needs to make – do I accept cash, cheque, debit card, credit card, 30 day payment terms, etc., etc., or not?

My face-to-face small business accepts cash or cheque, end of. I don’t add an extra item to my bills to cover the transaction cost of paying in cheques (around 60p) or me driving to the bank to deposit a wodge of notes. I don’t expect to go into a supermarket and see two prices for a tin of baked beans, one if I pay in cash, and another if I pay by credit card. So why is any surcharge necessary or justified, simply because I am dealing with a vendor on the Internet and they **choose** to accept credit cards as a form of payment?

Secondly, as you point out, the overheads of accepting credit cards are typically 2% or less. If a vendor is working to such tight gross margins that they simply cannot bear such an overhead to accept extra customer business, they either do not have a viable business model or they are guilty of predatory pricing.

As consumers, we should be questioning why no-frills airlines and holiday companies can’t afford to accept credit card bookings without charging an extra 2%. With such ridiculously low gross profit margins, can you really expect assistance or compensation when an Icelandic ash cloud grounds flights, or your hotel or cruise liner is found to be the source of food poisoning?

And the cost of these unviable businesses going bust is paid for by you and me, next time we book a flight or holiday through a more financially-stable company, so don’t kid yourselves that these companies are doing anyone a favour. Their anti-competitive pricing model means they can’t even afford to cover the basic overheads of running a business – the ability to accept and process a consideration for services rendered.

It’s not quite the same case, but what do people think about the theatre world’s universal (in my experience) practice of charging a “booking fee”? This is often charged even if you book over the phone or call in person at a box office. We recently bought stand-by tickets at “a leading theatre in Cambridge” at a face value of £15 each, only to be asked for a £2.50 “booking fee” PER TICKET.

It’s odd, but if the tickets had £17.50 printed on them I would not complain (provided of course that this was the advertised price).

Contrast with a leading Arts Cinema chain, who charge a flat fee of £1.50 for any booking over the Internet (any number of tickets) and charge exactly the ticket face value if you buy at the box office, whether by cash or credit card. They also have a loyalty scheme that waives the fee for members. Take a bow, Picture House Cinemas.

A COUPLE OF YEARS AGO I DID THE FOOTBALL POOLS ON THE INTERNET, NEVER DID IT BEFORE. WHEN MY CARD CAME IN THERE WAS A CHARGE – LOOKED LIKE I’D BEEN TO THE ATM, WHICH I NEVR DO. QUERIED IT AND WAS TOLD IT WAS FOR GAMBLING, THEY TOLD ME THE POOLS WAS GAMBLING AND THAT WAS THEIR CHARGE. THEY COULD NOT EXPLAIN WHY THEY CHARGED. WHAT THEY HAD TO DO WITH GAMBLING, NOR WHY THERE WAS NO WARNING.NO IDEA .MAYBE THEY WERE RELIGOUS, TRYING TO GET IT STOPPED! I SAID I WOULD NOT BOTHER THEM AGAIN, CUT UP MY CARD

Following the recent change in the law on 06.04.2013 I notice that Aer Lingus (I have to fly with them to my local airport in Ireland) are now charging an ‘Admin Fee’ of £14 to process debit and credit card payments? Is this overcharging (£14 instead of £2) for booking/processing a flight (we can’t pay via a free plastic method or cheque/cash) legal or illegal based on the new law?

Has this and other companies got round the law by changing the label from ‘Surcharge’ to ‘Admin Fee’? We all know what the £14 is; it is a surcharge/charge/fee/cost for using the only payment method allowed, i.e. credit/debit cards.

Also, the following statement from the Report ‘Rip-off’ Surcharges page on this website, i.e. Please note: booking fees, administration charges and other fees that don’t directly relate to processing payments are not considered ‘surcharges’ and have not been banned’, suggests administration charges/fees are not prohibited, am I right/wrong?

If these ‘Admin fees’ are allowed an unambiguous amendment to the law is required to avoid legalise and alternative words/phrases and interpretations making the efforts of Which? to have the surcharges banned, otherwise all the work will have been in vain

I don’t mind paying the correct ‘Admin fee’ instead of being overcharged.

Just rec’d my scooter Road Tax renewal in the post – £17 for the Road Tax PLUS £2.50 if you want to pay be Credit Card – this roughly equates to 15% which the Govt are not being charged by their credit card acquring bank. How does the Government get away with flouting it’s own rules!

For some years I’ve subscribed to BBC Wildlife Magazine. The renewal is now through buysubscriptions.com which is a trading name of Immediate Media Co. The annual renewal this year is £33.70 by direct debit or £38.90 by credit card. In other words, a credit card charge of £5.20, or an astonishing 15.4%. That just beats Phil’s Road Tax rip-off!