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19 Jul 2017
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The UK Treasury Said No To Extra Fees on Credit Cards

The UK Treasury department banned the so-called surcharges on credit and debit cards, imposed by businesses and public organisations as extra fee on their services. The ban will enter from 1st January 2018 and according to Stephen Barclay, Economic Secretary to the Treasury will put an end to the “nasty surprises” and “rip-offs”. “This change will mean shoppers across the country have that bit of extra cash to spend on the things that matter to them” he added.

Surcharges are those extra fees that customers need to pay when they use plastic cards for purchasing goods or services. Currently some of the most popular airplane companies such as easyJet and Ryanair charge between 1% and 2% extra if their customers use a credit card to purchase online tickets. Take away food applications such as Hungry House, and Just Eat also add a minimum of 50p on the bill, saying that this is most of the restaurants’ policy to charge a fee on credit card payments.

But businesses are not alone. Public organisations such as “HM Revenue and Customs” will take between 0.374% to 2.406%, if the taxpayers use a credit card to pay for their obligations. The size of the fee depends if the card is personal or a corporate one. “The Driver and Vehicle Licensing Agency”, on the other side, have a flat charge of £2.50 if the vehicle tax is paid by a credit card, which add up to a collection of additional £8.5 million a year. According to the government representatives, the total sum that businesses and public services are accumulating from these small fees per year is approximately £437 million (the data is for 2010). “Rip-off charges have no place in a modern Britain and that’s why card charging in Britain is about to come to an end. This is about fairness and transparency, and so from next year, there will be no more nasty surprises for people at the check-out just for using a card”, Mr Barcley underlined.

The UK Treasury department, admitted the idea was based on EU directive which bans surcharges on payments by Visa and Mastercard, but the British legislators are taking it a step further – including payments by American express and via PayPal.

The news was welcomed by many lobbyist and consumer organisations such as Which?, campaigning against “this unfair practice”. However, some specialists warned that imposing the ban might lead to increasing prices, which will affect both plastic card and cash payments. At the moment, banks are charging companies between 10p and 20p on every debit card and 0.6% on every credit card transaction. Therefore, according to the analysts from MoneySavingExpert.com, to compensate that loss some companies will raise their prices, “which could hit those who currently pay in cash or by debit card”.

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