The Government has confirmed it will ban excessive charges for using credit and debit cards and has launched a consultation on how to implement these plans.

This is a particular problem for those booking a budget airline flight, but applies in many other industries, such as when booking train and concert tickets. Often, the fee is hidden until the end of the online booking process, making it difficult to compare prices.

Key Points

  • Government launches surcharges consultation
  • Plans to ban traders profiteering on card payments
  • Hopes it will come into force by January next year

Under the proposals, traders will no longer be able to make a profit by charging consumers for credit or debit card use above the amount it costs them to process that payment.

Consumer group Which? estimates when paying by debit card, the cost to the retailer is 10p to 20p, while the cost of processing a credit card transaction is no more than 2% of the value of the purchase. So a £100 transaction would cost no more than £2 to process.

The Government first announced plans to stop businesses from charging consumers excessive payment surcharges in December last year, following recommendations from the Office of Fair Trading (OFT), after Which? highlighted the scale of the problem (see the Card surcharges MSE News story).

Huge fees

Many firms charge hefty fees for paying by credit and debit card. Ryanair charges £6 per person, per flight to pay if you do not hold its own Cash Passport card, though the airline claims this is not a surcharge.

The Government says the ban will ensure consumers are aware of the true costs of a service upfront.

The European Union's Consumer Rights Directive states the plans must come into force by June 2014, but the Government says it hopes to lay regulations by the end of this year, meaning traders will have to implement it from January.

'Unfair' charges

New Which? research reveals 84% of those it polled in a survey felt there shouldn't be any extra fees charged to consumers for paying by credit or debit card, while over three quarters (77%) of people polled thought fees were unfair. 

In addition, 74% of those who had encountered fees in the last year thought that any additional charges for paying by card should be included in the price quoted before payment, up from 67% in 2011.

Consumer Affairs Minister Norman Lamb says: "We want consumers to be able to pay for their goods and services without being hit by excessive hidden charges.

"It can often be frustrating when purchasing a product or a service online, to find out only towards the end of the transaction the final price is much higher."