High Streets Initiative · 19 July 2017

Ban on “rip-off” card payment surcharges could benefit independent retailers

Credit cards
The estimated total value of UK card payment surcharges in 2010 was £473m

The government has introduced new rules that will see the extra charges retailers add to payments for goods and services made by card outlawed as of January next year.

The practice, known as surcharging, has been commonplace in Britain for many years, but following an EU directive, the Treasury has called an end to these “rip-off” costs which burden consumers.

Fees for paying with a card – usually a credit card – get routinely slapped on everyday purchases like takeaway meals, cinema tickets and cheap flights, with consumers facing additional costs of as much as 20 per cent for paying with plastic as opposed to cash.

It is hoped the rule changes will hand more spending power back to consumers. In 2010, the Treasury estimated that the total value of surcharges for UK debit and credit cards was around £473m.

In an announcement, economic secretary to the Treasury, Stephen Barclay, said: “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.”

The new rules are the result of an EU directive applying to Visa and MasterCard surcharges, but the Treasury has said the UK is going a step further by also banning charges for American Express cardholders and users of payment services like PayPal and Apple Pay.

“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,” added Barclay.

Welcoming the changes, Josh Turner, the founder of social enterprise Stand4 Socks – a sock company which sells online as well as in stores and at pop-up markets – said that smaller, independent retailers would benefit from no longer having to pass the cost of card payment surcharges on to customers.

Turner told Business Advice that surcharge fees for using card readers are often set and imposed by the banks and payments companies that distribute card readers, and that it was up to independent retailers whether or not to pass the cost of using the technology – 20p plus two to three per cent of the value of each transaction in the case of his business – on to shoppers.

He said: “Only last week, a customer insisted on paying us 50p extra for using their card [to pay] as they were aware we will get charged. We often refuse, but I have had customers leave the money on the till and walk off after paying by card. Consumers are certainly aware of the charges banks place [on using card readers.”

Turner told Business Advice: “An increasingly cashless society is something we need to get more used to and it’s good to see the government accepting that more and more payments will be on cards and retailers shouldn’t pay the cost.”

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This article is part of a wider campaign called the High Streets Initiative, a new section of Business Advice championing independent and small retailers by identifying the issues that put Britain’s high streets under pressure. Visit our High Streets Initiative section to find out more.

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Fred Heritage was previously deputy editor at Business Advice. He has a BA in politics and international relations from the University of Kent and an MA in international conflict from Kings College London.

High Streets Initiative