Credit and debit card fee clampdown begins

Consumers have long been blighted by payment surcharges, in particular when buying budget flight, train or concert tickets. Often, the fee is hidden until the end of the online booking process, making it difficult to compare prices.

But from tomorrow, 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.

However consumers may not necessarily save money, with Easyjet and Ryanair for example, now charging "administration fees" on bookings instead of high card fees.

While transaction processing costs vary by provider, consumer group Which? has previously said it believes retailers pay no more than 20p for debit card transactions, and no more than 2% of transactions with credit cards.

The new rules are part of the Consumer Rights (Payment Surcharges) Regulations 2012.

The Government first announced plans to stop businesses from charging excessive payment surcharges in December 2011, following recommendations from the Office of Fair Trading (OFT), after Which? highlighted the scale of the problem (see the Card surcharges MSE News story).

It says the move ensures consumers are aware of the level of costs they are committing to and that traders who treat consumers fairly are not disadvantaged by those who use less transparent practices. These include only presenting the card fee at the end of a transaction to lure consumers towards less competitive offers.

Last year, 12 airlines, including Flybe and Ryanair, agreed to include debit card surcharges in the headline ticket price rather than surprise consumers at the end of the booking process, following action by the OFT (see the Airlines forced to display debit card fees upfront MSE News story).

Watch for new 'admin fees'

MoneySavingExpert.com money analyst Helen Saxon says: "This is a victory for consumers in that it takes the guesswork away when working out the final price.

“Now card charges have been removed, customers can now easily see what they’re going to pay. But 'administration charges' may swarm in to replace them.

"While the new rules won't necessarily mean overall prices are cheaper, they will make comparing prices between suppliers a lot easier."

'Fewer nasty surprises'

Consumer Minister Jo Swinson says: "The practice of excessive payment surcharges has been ripping off consumers for far too long.

"Consumers are fed up of thinking they will be paying a certain price for goods, only to find out towards the end of the process that the final price is much higher.

"I am delighted that the ban will stop retailers from cashing in by charging add-on fees that simply do not reflect the real cost of processing the payment. Consumers will be less likely to get nasty surprises as they will have a clearer and more transparent breakdown of what they are paying for."