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How a no-deal Brexit would affect your finances

Find out how your credit card fees, online shopping and banking might change

A no-deal Brexit could see consumers hit with higher credit card surcharges and slower payments for European goods, papers published today by the government suggest.

The technical notes outline what is likely to happen if the UK and the EU fail to reach an agreement before the UK leaves the European Union. Which? has called on the government to secure a deal that delivers for consumers.

We explain how a no-deal Brexit might affect your finances.

Credit card surcharges may be back

As of 13 January this year, EU rules banned retailers from charging customers a fee to use Visa and Mastercard credit or debit cards.

The rules applied to all purchases made by retailers or consumers with banks operating in the European Economic Area.

The UK passed its own legislation, meaning the surcharge ban is here to stay for UK purchases. But consumers buying goods from the EU, or from EU-based companies, may no longer be protected.

So, it’s likely that many European companies – including airlines and travel providers, which frequently levied card surcharges – could re-introduce them for the UK customers.

Prior to the rules being passed, consumers were hit by up to 2% surcharges for booking with credit cards on popular European airlines, such as Vueling and Eurowings.

A Which? investigation found KLM had continued to charge UK customers for booking with American Express this year, with the company applying the EU rules, rather than the wider-reaching UK regime.

Paying in euros may take longer

Most financial services regulation in the UK is drawn from EU directives. So if the UK loses access to this system, it could impact on banks’ access to the European payments infrastructure.

What does that mean for you? In practical terms, it may take longer to transfer money to Europe, or to pay for a purchase in euros. If for example, you earn money from an EU-based company, you might experience increased issues when being paid.

You may also be hit with higher transaction costs when buying online from the UK if the goods are from the EU.

UK firms may lose EU market access

Currently, UK banks and financial service providers benefit from ‘passporting’ – an agreement that allows European operators to offer services in other EU jurisdictions.

The UK has committed to temporarily extending passports to EU firms operating in the UK. If your bank is EU-based, it will be able to continue operating for at up to three years, and will have the opportunity to apply for UK market access under the new regulations.

It remains to be seen whether the EU will make the same offer.

In that case, UK firms would no longer be able to offer services across Europe, unless they have a European subsidiary. If you live overseas but currently bank with a UK provider, you might find their services are withdrawn.

It’s possible ex-pats in Europe risk losing access to lending, deposit or pension services.

But one thing you can be sure of is that your state pension won’t be frozen. In September 2017, the UK and the EU reached an agreement on pension uprating, meaning if you live in the EU, your state pension will continue to increase at the same rate as if you lived in the UK.

Beware of opportunistic scammers

The government will require financial services companies to proactively contact anyone likely to be affected by Brexit.

Where you are based, where your firm is based, the regulatory authorisations it operates and the services that it accesses will impact how you’ll be contacted as a customer of a financial service firm.

Any disruption during this time could present a perfect opportunity for scammers, who may contact people pretending to be from their bank, insurer or other financial services provider.

If contacted via phone, email or text comes out of the blue, you’re asked to provide personal details or you’re pressured to respond quickly, proceed with caution.

Don’t respond to the message or click on any links if you suspect it could be a scam.

Contact your financial service provider using the official contact information on its website, and ask your adviser to verify that the message you received is genuine.

As technology becomes more advanced, so do the methods fraudsters use to scam us. Our guides can help you spot scams and stay one step ahead of the fraudsters.

Which? calls for consumers to be protected

Peter Vicary-Smith, chief executive of Which?, says: ‘Dominic Raab has suggested that consumers won’t notice much change at all in the event of a no-deal Brexit, but people will be shocked to hear about the potential consequences contained in these papers.

‘It’s clear that there will be negative effects if we leave the EU without a deal, from the risk that some people could potentially be unable to access their pensions, to facing hefty surcharges when using a card to pay for goods and services outside of the UK.

‘This is not an encouraging start and the government can’t take consumer issues like this for granted. Securing a deal with the European Union is vital to ensure that Brexit delivers for consumers.’

Additional reporting by Melissa Massey.

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