Government to ban ALL charges for paying by credit or debit card

New rules which will come into effect on 13 January 2018 will mean you cannot be penalised for choosing to pay by card, either online or in-store.

Under the current rules, which came into force in 2013, companies should only charge you what it costs them to process a debit or credit card payment - they shouldn't make a profit on these surcharges.

But consumers can still face hefty charges, with fees typically around 2% and on some smaller transactions accounting for as much as 20% of the bill.

How the rules are changing

The new rules, which will be laid down in law, will mean ALL surcharges are banned. So there will be no charges for paying by debit or credit card, including American Express and linked ways of paying such as PayPal or Apple Pay.

The rules will apply to any UK company which is selling to UK consumers. We've asked the Treasury for a full definition of what it considers to be a UK company, and whether it could apply to a company that is not registered in the UK but does have a physical UK base. We'll update this story when we know more.

It's worth noting the new rules won't just apply to the UK. As this law is following an EU directive, companies across the EU will also be banned from charging these extra fees.

'Good news... but expect some companies to raise prices to compensate'

Guy Anker, managing editor of MoneySavingExpert.com, said: "Scrapping card surcharges is good news, especially for the millions of consumers who would otherwise have been milked by companies who whack on unexpected charges at the end of the process – something that has been happening for years.

"With the cost of living rising anyway, people shouldn’t be hit with unexpected fees. While it will make it easier for consumers to compare prices, we expect some companies will raise prices for all to compensate for the loss, which could hit those who currently pay in cash or debit card."

How much will consumers save?

Right now, cardholders are often charged fees of around 2%, but they can also be charged a flat fee regardless of how much they are spending. Here are a few examples of some surcharges we found:

• Driver and Vehicle Licensing Agency (DVLA) - £2.50 credit card fee on all transactions

• Council tax - 2.5% credit card fee for Ealing Council

• Flights - Flybe charges 3% on credit card and PayPal transactions

• Packaged holidays - Thomas Cook has a 2% credit card fee

• Paid-for TV - Sky charges a 30p/mth fee on recurring credit card payments

Shoppers are likely to make the biggest savings on expensive purchases. For example, if you use a credit card to buy a car or pay a wedding venue, you could end up paying 2% on a transaction costing thousands of pounds.

Of course, it is possible some retailers will choose to raise their standard prices to cover the cost of processing debit or credit card payments - or some could stop accepting cards altogether.

The new rules will come into force on 13 January 2018

Why are the rules changing?

The new rules stem from the EU Payment Services Directive, which lays out the changes EU governments must make by 13 January 2018.

This mean the new rules will be put into UK law - and so will continue to exist even after Brexit.

Stephen Barclay, the Economic Secretary to the Treasury, said: "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.

"These small charges can really add up and this change will mean shoppers across the country have that bit of extra cash to spend on the things that matter to them."