/ Money

We did it! Unfair card surcharges are being banned

Champagne bottle being popped open

With your support, we’ve lobbied long and hard to make ministers see sense about the unfair charges consumers have to pay when using cards. Now the hard work’s paid off – excessive surcharges are being banned!

On the first day of Christmas my true love gave to me… a ban of excessive debit and credit card surcharges.

After 43,202 pledges of support, 2,430 emails to Ed Davey, 8,765 emails to Mark Hoban MP, 12 letters from MPs (that we know about) sent to Mark Hoban, 9 parliamentary questions, 2 early day motions, 2 parliamentary debates and 40 ‘rip-off’ branded cupcakes, victory is ours – excessive debit and credit surcharges are banned!

How the ban will work

Today the government announced that it is banning excessive debit and credit card surcharges and I couldn’t be happier. This is a massive victory for thousands of you who have supported the campaign since we first submitted our super complaint to the Office of Fair Trading (OFT) in March.

The government will ban surcharges by implementing the Consumer Rights Directive – an EU law – in December 2012 rather than June 2014. This was the law we asked you to lobby Edward Davey about back in May, so all your nagging has certainly paid off – thanks Ed!

The Consumer Rights Directive will prevent excessive charges being levied. In practice, we imagine that will mean that the tiny cost of a debit card will be absorbed by the business, and credit card charges will be no more than the true cost incurred to the retailer for processing the payment. So goodbye to excessive £6 fees for a £30 flight!

Businesses need to catch-up quickly

While it’s been a lot of hard work, we’ve managed to have some fun along the way too. You may remember that back in November we sent Treasury Minister, Mark Hoban, 40 branded cupcakes as a thank you from the airlines for £40m they had earned in surcharges since June. We think it was his sweet tooth that finally drove him to doing the right thing.

Now that the government has taken action on this important issue, we want businesses to bite the bullet and quickly make the changes needed so you no longer have to pay for the privilege of paying.

I hope you’re all as excited about the ban as me, this victory is a great way to end the year and an early Christmas present for us all.

Comments
Edward says:
5 January 2013

HAPPY NEW YEAR EVERYBODY!

Really, the greed merchants are already hard at work ripping everyone off? They know how to make easy money.

I am afraid, that what is clearly needed is another Consumer campaign championed by WHICH? to prevent all Companies and the government from imposing surcharge payments.

All in favour say AYE!

Dr Cornel Fleming says:
5 January 2013

Phoned a local eatery whose owner is a friend and who adds 50p to the bill if credit card used. Says it covers what he gets charged and leaves him slightly ahead,and that makes sense! I also asked the owner of a bookshop who pays about 2%. Adding £2.50 to the cost of a normal tax disc is over 10%. And I repeat…rip-off!!

I believe that credit card companies charge retailers and service providers a percentage rather than a fixed price for their service, whereas retailers and service providers usually have a fixed charge for customers using a credit card. Thus DVLA is charging the same charge irrespective of whether the VED is £20 or £465.

Dr Cornel Fleming says:
5 January 2013

You mean a fixed overcharge for the vast majority of car owners!!!

I hope that most car owners have the sense to pay in a way that avoids a surcharge. I have suggested three options.

No one forces you to use a credit card to make a purchase. The fee is clear and upfront from DVLA – I use a debit card (probably easier to get from your bank than a credit card). Mind you, in the olden days you had to make a visit to the post office – how much would that cost now in fuel, parking – £2.50 doesn’t go that far. The same applies to my Council Tax.
When I do use a credit card I pay off in full, so apart from getting protection and convenience, I benefit (but not much these days!) from between one and two months free credit. I should thank those who do pay the extortionate interest rates for that.

Andrew says:
11 February 2013

I am wondering if anything has actually happened about this issue legally. I ask because Odeon would like to charge me 75p per ticket to book 3 tickets at £2.50 each for their family showing this morning – a charge of 30%. The charge is the same for debit or credit cards. Since we are now after the December deadline I ask has anything changed?

Andrew says:
11 February 2013

Update – the fee of £2.25 for three tickets applies even though the adult ticket is free! So the charge applies to a transaction of £5. If there were 2 adults then the charge would be £3 on a £5 transaction – or 60%! What is the record for largest percentage fee?

I understand that the booking fee price cap became law in the last few weeks.

It’s now an offence to charge excessively.

http://www.bbc.co.uk/news/business-22042309

Edward says:
15 May 2013

I am not sure that it is a “price cap.” I think that these surcharges / “booking fees” etc are still unregulated in the UK.

However, Companies want our business and the Online businesses are proceeding at a rate of knots!

However, these same companies who are fighting for our custom are still being very greedy because they are fleecing us; customers, with these administration charges / surcharges / booking fees etc.

When you forensically examine these extra charges, most of our Online business transactions are carried out ELECTRONICALLY. We even get “automated responses” from these companies. We hardly need to speak with a “customer care person.” Yet, these charges are levied against us for giving our business to these companies!

These charges, at whatever level, are therefore wrong and unfair.

I hope CEOs, MDs and the politicians read our comments and take positive action to correct this blatant injustice.

Why have I still be charged £6.00 per person booking fee with Ticketmaster for a booking at the Newcastle 02 Arena?? Is this legal?? or have I been “done”?? Please give me some up-to-date guidance on these charges.

Cinema goer says:
5 August 2013

In practice, my local cinema’s OM has told me they’ve raised prices to cover the cost lost by the law. This means that paying members have to pay more – it was part of the deal of Picturehouses membership to not have to pay these! The law needs to protect the consumer in practice, not have the charges moved. Many of query inflation and price rises and most certainly why costs are passed to the public. The lobbying is not yet finished!

Robert says:
6 August 2013

Cinema goer, you may feel aggrieved, but previously you were being subsidised by those paying with cards. Remember the real cost to the cinema of a CC transaction is only about 2% (say 15p on a £7.50 ticket). I regard the result as a success because the true cost is now displayed up front and the rest of us are not subsidising you!
Charging 50p or whatever to use a card (which of course is probably how most people pay) is just a way to reduce the headline price but make the profit up elsewhere. All booking or admin fees should be banned – that’s part of the cost of running the business.
The other inconsistency is that if you pay with cash, the cinema has costs associated with security and banking, so it probably costs as much per transaction as a card!

Sorry Robert, I have to disagree with you – your “real” cost takes no account of the cost of renting the terminals form the banks, the cost of the telephone call made every time a card is inserted, the cost of the electricity to run the terminals and the fines which the banks impose if the retailer does not process enough transactions to generate the stipulated revenue (for the bak) in processing fees.

This is the big issue with these charges: no one really considers the REAL cost of processing the cards, only the actual PROCESSING FEE per transaction. There are a great many on-costs.

Robert says:
21 September 2013

OK Dave, but a lot of those costs are really just part of the cost of running a business. As I said you are not charged for paying in cash, yet the business has had to install a safe, go to the bank daily/weekly or hire a security company to come and collect the takings, pay insurance based on the maximum amount they could hold over a holiday weekend, employ security staff, etc.

Running a business costs money, and when you buy something, you should not have to pay for the goods or service, then pay a booking fee, then an admin fee, then a card fee, then a fee to actually print a boarding pass if it is an airline, then a fee to use the loo… I’m surprised our favourite Irish airline hasn’t introduced a charge to use the steps to board the aircraft! After all steps have to be bought and maintained and someone employed to push it up to the aircraft.

Whether it is a cinema or airline, the price should be the whole inclusive price. If they choose to make themselves easier to do business with by accepting cards – especially if they are working over the internet – then that is a commercial decision they made. If they don’t think the cost of the cards is worth the extra business, then they should not accept cards!

Robert said “Whether it is a cinema or airline, the price should be the whole inclusive price.” – absolutely agree – the price displayed should be the price to pay.

My suspicion is, though, that if the on-costs of taking cards (which are, as Robert also said, part of running a business) were added to the prices before ticketing up, there would be outcry from those paying cash, who would be subsidising the card users even more than they are now.

Whilst I absolutely agree with Robert that the businesses have overheads, and card fees plus running costs of the machinery are part of those overheads, it is morally and commercially reprehensible that the banks profiteer from this in the way that they do.

Some of us are old enough to remember the 1990’s when Barclay’s connect was first introduced, and with it the first ever “PDQ” terminals: if the banks had not refused to guarantee Debit cards unless they were processed electronically (which is what happened when Connect first came out) retailers could have gone on using the “zip-zap” manual cards imprinters and vouchers. These were supplied FREE by the banks and the vouchers to go in them were also FREE. They did not use electricity or telephone connections and the cost of handling cards then was indeed just the processing charge. It is the banks who have driven this whole affair from day one and who are making the money out of it. It doesn’t matter which way we hide, disguise or wrap up the costs into the shelf edge price, the business overheads are still phenomenal now compared to what they were pre Barclay’s Connect because the banks have forced retailers into using this equipment out of which the banks make the money. It is therefore the BANKS who still need to be regulated and controlled in this as in all else that they do.

Robert says:
21 September 2013

Dave, Having read your other posts, I do completely agree with you that the root of the problem is the way the banks are profiteering from card use. Probably it is becoming more of a problem now that they are being forced to stop selling PPI, ID theft protection etc. How else will they pay for the bonuses and generous pension schemes they have?

In 2009 a banker I met on holiday was bitterly complaining to me that he now had to start paying 3% towards his previously free pension since the credit crunch. I told him that several hundred people had lost their jobs in my company, and all the rest of us had to take a 10% pay cut. He then told me that because of the reduced volume of transactions/foreign exchanges/loans by industry (the sector he worked in) the bank had put up their fees in order to protect profits. He implied that my company should have just increased our prices! These guys live in a different world from the rest of us!

Absolutely agree with all of your last posting Robert!

Edward says:
6 August 2013

Quite clearly, yet again, card charges etc is the real bread and butter issue.

Why are companies etc imposing and increasing their “fees” for using your Card?

GREED, is the first word that comes to mind and Banks and other organisations are getting away with it! everyone is feasting on the gravy train.

So who can do something about this unfairness? Banks and companies will never self-regulate themselves in favour of consumers; the cash cow is there for them to milk at will!

I call on the government to wake up to this injustice and prove that they are on the side of the people. We need action NOW.

Thanks for your support Edward. It is now illegal for companies to charge excessive surcharges when paying by card – that’s more than 50p using a debit card or more than 2% if using a credit card. We’re in the process of catching out companies still charging excessively and we’re encouraging our supporters to report the offenders. If you spot an excessive charge, please report it here: http://www.which.co.uk/campaigns/card-charges/

Sadly, but not at all surprisingly given the state of the government and the banking industry, the cap of 50p on a debit card and 2% on credit cards means that the retailers are still actually going to lose out because the banks still charge vastly more to process DEBIT cards than they do to process CREDIT cards – i.e. the government has got it back to front (again).

This is a complicated issue (politically) because the government has backed the banks in trying to abolish cheques (which the banks charge far less to process, undoubtedly why they want to force everyone to use DEBIT cards, so they can make more money) and the banks have all but succeeded because in abolishing the Cheque Guarantee Scheme most retailers now won’t risk taking cheques. Therefore the government would be in an awful egg-on-face position if they limited the charge on CREDIT cards at a lower (realistic) rate than DEBIT cards as the true way in which the banks are profiteering from DEBIT cards would become better known.

The upshot is that the larger retailers will simply add a little extra onto the mark up on all goods, so that everyone, paying by all methods including cash, pays to subsidise the processing of DEBIT cards, and the smaller retailers will simply be squeezed further and more of them go to the wall.

Also the caps on the charges don’t take account of the punitive charges which the banks levy on retailers for the purchase or rental of the card terminals, the cost of the telephone call which every terminal makes every time any card is inserted, even if the transaction is aborted or declined and the cost of the electricity to run the terminals (which is infinitesimally small for one terminal but when you consider large stores with maybe 40 or 50 terminals in every branch and possibly hundreds of branches soon adds up). Not to mention the fact that the banks FINE retailers who do not process enough card transactions in a month to produce the agreed “tariff” for the bank – this fine is often in the order of several hundred pounds a month and is levied even if the retailer is just a penny short of the “tariff”.

For anyone interested in finding out more details of these issues, look at the Which? Convo’s about credit and debit card charges, cheques, the cheque guarantee scheme and Chip & PIN – there is endless detail from many people’s perspectives, including small traders who have been forced out of business by the processing charges.

I’m not saying that we should allow the free for all of sky-high charges to the customer, far from it, and from the customer’s point of view, which? and the government have made some positive steps here, at least at face value, but the upshot will be that every one of us pays a little more for every item we buy and every service we use and quite a few traders will suffer and fail …. some of them will be owned by individuals who are “customers” elsewhere.

As in so many issues, the REAL issue lies with the banks and no one, Which?, Government, or anyone else, seems willing to tackle them, even now.

Richard Owen says:
20 September 2013

So the government have banned excessive creditcard surcharges – only allowed to charge what it costs them… so https://www.gov.uk/vehicle-tax can charge £2.50 for a creditcard payment, and if my tax disc was £30, that’s 8.33% surcharge – surely it doesn’t get charged that much for a £30 payment?

So government, you brought the law in, why not abide by your own rules?

I had a merchant account in Canada and in both the USA and Canada surcharges by merchants was absolutely banned, the merchant charges to me were a percentage of the transactions, the lower the transaction average the higher the percentage cost, however it never exceeded 5% of the transaction amount. It helped also to find a bank or credit union that gave a greater break to small businesses, does anyone know if, or how, the rest of the EU charges?

Edward says:
21 September 2013

Dear hard pressed British European people,

Again and again, I become more and more convinced that this issue of credit and debit card surcharges is not going to go away unless and until all such charges are LEGALLY REMOVED.

Until WHICH? definitely start a campaign to get this government to eradicate these charges I have to tell you all that you are wasting your time and resources complaining to them.

So what are you going to do WHICH?

Hi Edward, we successfully campaigned for excessive surcharges to be banned following our campaign in 2011. Since the 6th April 2013 it’s been illegal for companies to charge more than 2% for using a credit card or 50p for using a debit card. If you catch a company charging above these amounts, please report them using our online tool. http://www.which.co.uk/campaigns/card-charges/ Thanks, Charlotte

Edward says:
23 September 2013

Dear Charlotte,

Thank you for your response.

I call upon everyone who has commented on this Which? conversation board to make their views known. Do you think that the real issue is the removal of ALL surcharges which are applied to using your Credit and Debit cards?

This has now come down to a simple issue and I hope that there will be a great response from everyone. Thanks.

R Welch says:
20 January 2014

Gatwick parking still charges £2 for anything other than a debit card payment on a £30 car park booking. 6.66%!
Are airports exempt from the law?

FrankO says:
3 February 2014

I just booked a flight with FlyBe. They still have a standard £5 charge for credit cards. Ridiculous!

If you pay for a flight using a credit card, the company will have to pay the credit card company a significant amount of money, which varies according to size of business and what they have managed to negotiate with the credit card company. You benefit from free credit and if your payment is over £100, credit card payments offer protection in the event of a problem.

In contrast, debit card transactions are cheap. Which? gave a figure of 20 pence recently, so companies can reasonably be expected to absorb this charge in their prices.

My suggestion is to pay by credit card if there is no surcharge, or pay by debit card.

A debit card surcharge is unreasonable. A credit card surcharge is reasonable provided that it reflects the cost to the retailer.

DickieMint says:
10 February 2014

Using Laterooms.com to book Millbatch Farm B & B in Meare, Glastonbury I could only book by pre-paying using a Credit Card for which a 3% service charge was levied.
1. Can a supplier insist on pre-payment with a credit card?
2. As they insist on the credit card, are they breaking the Consumer Rights Directive?
3. Whilst taking Debit Cards also the levy wording says “cards” assuming debit as well as credit?

I have been reading the document on surcharges, published last year:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/175298/13-719-guidance-on-the-consumer-protection-payment-surcharges-regulations-2012.pdf

This allows for a trader to make a surcharge that does not exceed the cost incurred for the appropriate type of transaction. It also allows the trader to apply a surcharge that reflects the average cost of this type of transaction, allowing the same surcharge to apply whether the transaction is small or large.

These provisions may seem fair enough at first glance, but the consumer has no way of knowing whether a surcharge actually reflects the cost to a trader or whether a surcharge is unfair. What we need is a maximum permitted surcharge or maximum percentage surcharge, so that the consumer knows exactly where they stand.

ross oaker says:
12 March 2015

But this is still going on. I booked a ticket for 3 people with BA they charge 5 pounds each but its only one credit card transaction !!!

Eram says:
13 March 2015

The UNFAIRNESS continues and this must be eradicated.