Paying by card can increase the cost of goods and services by up to 200%, according to new research from Which? Money.
Hidden charges that are applied when you pay with a debit or credit card can mean that flights, cinema tickets and train fares cost people a lot more than they bargained for. Whether a surcharge for paying with plastic is attached as a flat fee or a percentage of your total spend, consumers hit by card charges will end up paying more.
Costly card charges
Paying for a £19,000 Saga cruise with a card, for example, would cost you £470 in charges. A £1.70 ticket bought from thetrainline.com costs an extra £3.50 if you pay for it by card – a price increase of 200%.
When questioned, most retailers cite card processing costs as the reason for the surcharges they impose. But Which? Money found that the ‘interchange fee’ card operators charge merchants’ banks is typically just £0.10 for debit cards and 0.8% for credit cards – a lot less than the 5% and 3.5% fees some companies charge for paying by each type of card.
Which? Money found card surcharges were most prevalent in the travel industry. Many airlines have increased card charges since 2009, and some levy fees per item purchased, rather than per transaction – even though banks themselves class the purchase of a return ticket as a single transaction.
Which? also found over 50 councils charging up to 3% to make everyday payments by credit card. Council tax, housing rents, planning applications, school dinners and meals on wheels are all among the payments that can incur a surcharge. A small number of local authorities also charge to make penalty payments by credit card, including parking penalties, green waste bin charges and dog fouling fines..
Which? verdict on card charges
Which? chief executive Peter Vicary-Smith says: ‘People don’t like card surcharges and it’s no surprise when the costs they pay don’t match those incurred by the retailer.
‘There can be no justification for high card surcharges as all too often they just seem to be an excuse for ramping up costs. While companies may want to recoup merchant fees, these charges need to be fair and transparent, so consumers know the real price before they begin a transaction.’
Which? Money when you need it
You can follow @WhichMoney on Twitter to keep up-to-date with our Best Rates and Recommended Provider product and service reviews.
Sign up for the latest money news, best rates and recommended providers in your newsletter every Friday.
Or for money-saving tips, and news of how what’s going on in the world of finance affects you, join Melanie Dowding and James Daley for the Which? Money weekly money podcast
For daily consumer news, subscribe to the Which? news RSS feed here. And to find out how we work for you on money issues, visit our personal finance campaigns pages.