Some UK Retailers Plan Workaround On Credit Card Surcharge Ban

Some UK consumers will not have a Happy New Year if some retailers have their way. As the following article explains, certain merchants have found a way to get around an upcoming ban on credit card purchase surcharges.

Retailers are planning to introduce new charges to sneak around a ban on rip-off credit card fees, it is claimed. New rules from January 13 are to prohibit the addition of extra charges, which have been levied at up to three per cent, when customers pay by credit card. Firms often have to pay for collecting payments via credit card, but only at a tiny percentage rate, and many have been making a fortune out of customers by billing them excessively for the privilege of paying with plastic.

It seemed new legislation would stop it – but according to a report yesterday, unscrupulous companies are planning to simply increase their prices or introduce new supposed ‘service charges’ to ensure they get the same amount of cash. And customers will keep paying it. To make matters worse, some of the price rises will be across the board, affecting cash payers as well as those using credit cards.

The new rules were brought in to protect consumers, because so many shops, holiday firms and even councils and other public bodies have been making customers using credit cards pay fees amounting to up to three per cent extra.

The fees have been said to be necessary to cover costs – but for two years the EU has limited charges firms pay for accepting credit cards have been limited to just 0.3 per cent. Even though the rule change is imminent, Ryanair was still charging customers two per cent for paying with credit card, and EasyJet one per cent, well into December.  Local authorities including Warwick district, Buckinghamshire county, and Derby City councils were all still charging one per cent.

According to the newspaper, the source said: ‘We agreed to increase all our prices by whatever amount we calculate will cover the cost of the fees we are charged by Visa, Mastercard and American Express.

‘We estimate that removing the surcharge will result in a significant shift away from payments by debit card and bank transfer so the increase [in extra costs] will be greater than the current credit card surcharge.’

One would think that this surcharge end-around will not take hold with customers as some merchants look for extra cash. Nothing escapes social media today and the offending retailers will certainly be called out. But some consumers may still be oblivious and just pay up. As always—caveat emptor.

Overview by Raymond Pucci, Associate Director, Research Services Advisory Service at Mercator Advisory Group

Read the quoted story here