From the 13th January you should no longer be charged a fee for opting to pay by credit or debit card – but companies will still be able to add booking or admin fees as long as they also apply to other forms of payment.
The change is good news on the surface for consumers, who will no longer have to pay fees just because they’re paying on plastic. Yet there are fears some companies will raise prices or introduce new service charges as a result, while in other cases – such as when settling a tax bill with HMRC – you may no longer be able to pay on a card at all.
How are the rules changing?
Under 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. However, consumers can still face hefty charges, with fees typically about 2% and on some smaller transactions accounting for as much as 20% of the bill.
From Saturday 13 January all surcharges for paying via credit or debit card will be banned – this includes payment methods linked to your card, such as PayPal or Apple Pay. Companies are still allowed to levy a surcharge if you opt to pay by cash or cheque.
Banning credit card fees should make a real difference on some purchases. For example, British Airways currently charges a 1% fee of up to £20 on credit cards, Ryanair charges 2% on credit cards and the DVLA a £2.50 fee on credit cards – from Saturday, these charges won’t apply. (And if you’re about to book with a firm that charges fees, it may be worth waiting.)
The change is coming in as part of a law setting out new payment regulations. The regulations are based on an EU directive which will apply throughout the EU – but as this is a UK law change the new rules will continue to apply after Brexit.
Which companies does the ban apply to?
As the new rules are based on an EU directive, the ban on card surcharges applies to any transaction when the bank(s) of the consumer and the retailer are based within the EU, or Iceland, Liechtenstein or Norway. Bear in mind though that while in the UK the ban has been extended to payment methods such as PayPal and Apple Pay, there’s no guarantee this will be the case elsewhere.
If a retailer’s bank is outside of these countries you may be charged a surcharge, but the company is only allowed to charge what it costs it to process the transaction.
In practice the ban will apply to many companies, and it will also apply to councils and Government organisations such as HM Revenue & Customs and the DVLA.
For more information visit the Money Saving Expert