Consumers to see no charges on debit and credit card transactions from 2018 according to the finance ministry.
As from January 2018 under a new European directive will ban companies from applying charges to debit and credit card transactions. In some instances, consumers pay up to 20% when they make payment on cards for things like retail expenditure, flight bookings or food bills.
The fees are already banned in many European countries including Germany, France, Portugal and Italy. The ruling will also take a look at local government and councils who also charge surcharges on some of their services.
The surcharges are usually applied to cover the cost of credit card machine processing but these figures are usually inflated to the much smaller percentages that businesses suffer when they do take sales via card transactions. There has also been a rise in UK consumers using credit cards more than cash so this will serve to help in the long term.
In the UK there is around £473 million in surcharges in 2010 according to the Treasury figures.
“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,” said Stephen Barclay, economic secretary to the Treasury.
If a company continues to add surcharges from 2018 they will be forced to repay fees and possibly face thousands of pounds in fines.
It seems good news for the customer who doesn’t have to worry about incurring extra charges when paying by credit card. One or two large names have come under scrutiny for surcharge fees. Flybe who charged 3% for card transactions and Swinton Insurance who charged a minimum £5 surcharge for card transactions, both of whom have really hit the press today.
But won’t these companies load the cost somewhere else? Ticket sales or extra premium? Quite possibly.
The companies can charge whatever they feel is appropriate to remain competitive in the market. Could this be an opportunity to get ahead of the game and drop surcharges early? Maybe make it the centre of a marketing campaign?
The BMCAA have stated that it is likely that businesses such as holiday companies, ticket companies, hospitality and retail businesses may increase product and service costs instead. It isn’t likely to affect the business cash advance space with more and more businesses looking to borrow against their credit and debit card transactions.