Debit card charges to be abolished next year

Debit card surcharges are to come to an end in 2018. (Photo by Pascal Le Segretain/Getty Images)
Debit card surcharges are to come to an end in 2018. (Photo by Pascal Le Segretain/Getty Images)
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Charges levied by companies on customers paying by debit or credit cards will be scrapped next year, the UK government will announce today.

The new rules, which come into effect in January 2018 under an EU directive,will ban companies from all bank card charges.

Consumers currently face charges of up to 20 per cent for making purchases such as flights or fast food by card or other services such as PayPal.

Such fees are already banned in several EU countries including France, Germany, Italy and Portugal.

The rules will also tackle surcharging by local councils and government agencies such as the DVLA.

Consumer groups and UK Finance, the financial trade association, have welcomed the move.

But the Federation of Small Businesses in Scotland (FSB) warned retailers might need to pass on some of the costs to consumers, while travel operators said the card fee ban would hike holiday costs.

Businesses usually say the surcharge is to cover the cost of processing a card payment.

The total value of surcharges for debit and credit cards was an estimated £473 million, according to Treasury figures.

Economic Secretary to the Treasury, Stephen Barclay, 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.”

The government has previously capped the costs that businesses face for processing card payments and said it will engage with retailers to assess if there is any more that can be done to help.

The Association of British Travel Agents (ABTA) advised its members in May that the new rule would have “a significant impact on members’ businesses” and advised them to start planning in advance for the changes by taking preemptive action such as increasing headline prices and offering incentives to customers to use payments methods other than cards.

Mark Tanzer, ABTA’s chief executive, said the ban came from new EU legislation and added: “As it is a pro-consumer measure there is no scope to overturn it.”

Noel Josephides, chairman of Sunvil travel company, predicted that the ban would drive up prices, negating the impact intended by Brussels.

Treasury consultation documents appear to flag up a similar view, stating: “Merchants... would be expected to see a reduction in revenues... It is expected they will pass on the majority of the costs to consumers through higher prices.”