They’ve long been the bane of consumers across the nation but dreaded card payment surcharges are finally on their way out. Following the lead of an EU initiative, a new government directive states that businesses will no longer be allowed to add additional fees for card users from January 2018.

While the news has been welcomed by many campaigners and consumer rights watchdogs, others fear that companies will simply make up the difference by upping their prices or charging consumers for different services instead.

In Breach of Regulations

Card surcharges were initially introduced to cover the costs faced by businesses who have to pay bank charges for card transactions. These bank charges are capped – a result of another past EU directive – and banks now generally charged up to 20p per debit card transaction and 0.6% per credit card transaction. According to Consumer Rights Regulations, businesses are only permitted to pass on charges to the customer that will cover – not exceed – these costs. However a number of consumer rights groups started to campaign for change after pointing out that many companies were in breach of regulations by exceeding these costs and using card payment surcharges as a concealed way to make more money or to make their headline prices seem lower and more appealing.

While small businesses and food delivery companies were found to be overcharging, it was airlines that were marked out as some of the worst offenders. Ryanair in particular was accused of advertising low initial prices before adding on surcharges of up to 2% while fellow airline Flybe was found to be adding surcharges of up to 3% with a minimum £5 fee.

It’s not just private businesses that have been levying the unpopular charges either. Local government authorities such as the HMRC have been charging 0.6% for credit card payments while the DVLA is believed to have made over £40m since 2012 with it’s 2.5% surcharge.

In answer to this unpopular practise, the EU originally banned surcharges on VISA and Mastercard payments but the government has gone one step further and added American Express and PayPal to the list as well.

Hidden Costs

Despite a largely positive reaction to the news, some industry experts believe that the directive isn’t as beneficial for the consumer as it’s made out to be. They say that the cost of bank transactions will inevitably be passed on to the customer one way or another and that many businesses will simply up their prices or hide the costs in other services to make up the deficit.

However others argue that it is unfair that businesses are expected to absorb bank fees in the first place. While companies could choose to stop accepting forms of payment that come with the highest fees, to do so would cut off a large number of their customers and could be potentially devastating. Their only option is to either cover the costs themselves or pass the cost on to the customer.

Instead, some are calling for the government to turn its eye to bank fees next. The initial cap on bank charges was estimated by the British Retail Consortium to have saved British business £480m; lowering this cap could now be the answer to ensuring a fair deal for both consumers and businesses. If you have questions about how changes to card payment fees may impact your contact centre, you can of course get in touch with our secure payment specialists by visiting our contact page.