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Debit and credit card surcharges set to be banned

Companies are facing a new law which will prevent any surcharges on card payments. But how will this affect you?

Credit and debit card charges bannedThe current rules, which were introduced in 2013, state that businesses can only charge customers what it costs them to process a card payment. No profits should be made on these surcharges.

This said, consumers are often still charged a lot of money to make card transactions. Fees usually hover around the 2% mark, but can reach as much as 20% on smaller transactions.

This is why consumers spent £473m on surcharges alone in 2010, according to estimates from the Treasury.

These new laws stemmed from a European Union directive, which already bans charges on Visa and Mastercard. However, next year’s initiative will go much further. It will become illegal to place surcharges on the usage of any debit or credit card, including on American Express and on linked ways of paying, such as PayPal and Apple Pay from 13th January 2018.

Any UK company which is selling to UK customers will be affected by this new rule. Similar changes are spreading across Europe with the EU Payment Services Directive, which sets out what changes EU governments must make by early 2018. These terms will be written into UK law, which means Brexit likely won't have any affect.

Want to know more about credit cards and how they work. Check out our ultimate credit card guide.

So how will this affect you?

Overall, campaigners have welcomed this news, arguing that consumers will get a better deal. At the moment, for example, the DVLA charges customers a flat fee of £2.50 per credit card usage, an initiative that has made them £42m richer since 2012. Air company, Flybe, charges 3% on any credit card or PayPal transactions.

Consumers are likely to make their largest savings on their priciest purchases. For instance, if you use your credit card to buy a car or an expensive holiday and you get charged 2% on it, you will pay far more surcharge than if you use it to top up £10 worth of petrol!

Nonetheless, there are likely to be some less appealing consequences.

Businesses may put their prices up to deal with these changes. Banks usually charge large retailers between 10p and 20p for every debit card transaction, and 0.6% for credit cards. There is also a chance that shops could start refusing card payments altogether, especially smaller ones.

Fairer Finance has been fighting for this change. Its managing director, James Daley said: “Maybe they will bump the price up. That’s fair game. You have to take customers’ money somehow. And it’s not reasonable to add that cost on at the end of the process. Why not put it in the headline price?”

One other issue is how these new laws will be enforced. Currently, many businesses are in breach of regulations by charging customers more than the banks charge them on transactions. The government have not released a solution to this as of yet.

Shops which currently charge you

There’s still a good few months to go before the surcharges are banned, so we’ve got a very quick list of companies which currently charge you to use your card. Watch out!

  1. Just Eat and Hungryhouse: 50p for card payments, although sometimes the restaurant will pay.
  2. Ryanair currently charge 2%
  3. Easyjet charge 1%
  4. The DVLA charge £2.50 per transaction

If you now feel empowered to avoid places that are charging you extra money and save some dollar instead, head over to this ultimate guide to saving pennies. We also recommend you check out these ways to make money quickly, so that come January next year you will have a healthier looking bank account, which is ready to make the most of no card charges.

Know any other businesses that charge for card payments? Let us know in the comments.

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