Customers will no longer be stung with a surcharge when using a card to pay in a small shop or booking concert tickets or travel online, according to new regulations based on an EU directive.
This will apply to both in-store and online payments and includes American Express and other payment methods including Apple Pay from Saturday, January 13 2018
Companies are still allowed to levy a surcharge if you opt to pay by cash or cheque. Firms may also charge new service fees to customers as long as the fees apply no matter what method of payment is used.
Here’s everything you need to know about the new law.
How has it happened?
Rules in force since 2013 dictate that firms are not allowed to charge customers more than what it costs them to process a credit or debit card payment but this only runs to a few pence per transaction.
Despite this, card charges typically run at about 2 per cent, and surcharges of 50p are still seen in some convenience shops and pubs, particularly on small amounts such as under £5 or £10.
Some government agencies, including the Driver and Vehicle Licensing Agency (DVLA), levy a “flat rate” of as much as £2.50 to pay by card.
This means that in some cases customers are paying up to 20 per cent to pay by card. Flight companies such as Flybe have also been criticised for charging up to three per cent.
From Saturday, the ban will cover all kinds of surcharge after campaigners said rules were being circumvented due to a perceived “grey area”.
Who is affected?
All UK companies selling to UK customers will be bound by the new law, which follows an EU directive.
Since it is being written into UK law, it will remain in place after Brexit.
Is it all good news?
Customers will in theory benefit from not having to pay the surcharge when they use card.
When the rules were announced, Stephen Barclay, 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.
“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.”
However, experts warned that banning surcharges may lead firms to hike prices or add charges in other ways. It could also mean that some small businesses stop taking cards completely.
Andrew Hagger, a consumer finance expert at Moneycomms, told the Financial Times: “It’s a good move, although long overdue, but there is the downside as this revenue that companies have been used to getting will disappear, so what do they do? They will likely look to recoup it elsewhere.
“I don’t think they’ll take it lying down, so it could mean an increase in the cost of services. It’s a bit of a sting in the tail for the consumer.”
The takeaway delivery service Just Eat has been criticised over the introduction of a 50p “service charge” shortly after their 50p card surcharge was withdrawn.