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12 Jan 2018

Rip-off card surcharges to end: everything you need to know

Good news for consumers but watch out for firms flouting the rules

From tomorrow (Saturday 13th January 2018) new rules mean companies as well as Local Authorities and other government agencies such as HMRC can no longer charge a fee to customers making payments by credit or debit card.

The ban on surcharges applies to all Visa, Mastercard and American Express payments as well as PayPal and Apple Pay and crucially will remain law when the UK leaves the EU in March 2019. However, there are concerns that some companies will put prices up rather than absorb the cost or try to get around the ban with other sneaky charges.

Which? investigates what impact the new rules will have and offers advice on what to do if you find you are still being charged a fee at the checkout.

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How much will you save on card surcharges?

Airlines and travel firms are typically among the worst offenders for surcharges but local councils are also guilty of the practice too.

While the majority have been proactive in removing the charges well in advance of the new rules, Which? found many were still applying charges right up to the deadline.

We checked the charges applied by airlines and holiday companies with a week to go before the ban comes into force. The results are in the table below.

All of these firms told us they would be complying with the ban from the 13th of January, so if you want to avoid the surcharge you should wait to book your trip.

Councils appear to be just as slow as the travel firms in complying with the new law.

We made a Freedom of Information request to 379 councils in England, Scotland and Wales to see if they were imposing surcharges for paying council tax by credit card and debit card up to the deadline.

Of the 265 that responded, 127 confirmed they still were and a quick check of remaining councils found 47 listed charges. We've combined the data in the table below.

The largest credit card surcharge we found was applied by Spelthorne Borough Council (2.7%). The average band D council tax bill in this area is £1,749, so residents living here that prefer to pay their bill by credit card will save over £47 once the new rules come into force.

Will prices rise because of the card surcharges ban?

The ban on surcharges is good news as you will no longer be hit with any surprise fees at the checkout.

But there are concerns that rather than absorb the fees companies will pass the cost onto customers in the form of higher prices.

We spoke to a few major airlines to check how they would react to the ban on surcharges and asked if prices would rise as a result. The responses were fairly mixed.

  • British Airways said: 'We have no plans to raise our prices. We know our customers want great value and we're now offering more low fares than ever before.'
  • Aurigney Air told us: 'We will abolish card charges in mid-January, there will be no change in our fares at that time.'

Ryanair has also publicly pledged to lower fares: 'When the law changes we will comply with it as required - and we will continue to lower fares this year.'

But Norweigian and Flybe were less gallant about the move.

A Norwegian spokesperson said: 'We fully comply with EU rules and regulations. As credit cards have associated payment costs, we are still assessing how we cover these charges but we have no plans to raise fares as a result of the new law.'

A Flybe spokesperson told us: 'Flybe can confirm it will comply with the new government regulations regarding credit card fees, however the airline does not believe that the move to ban companies from passing on the cost for use is in the best interests of consumers.

'The change will inevitably result in price increases as businesses seek to recoup the associated costs they must incur that includes processing usage and covering fraudulent transactions. This will disadvantage the majority of those who now choose to rather pay for goods and services by cash or with a debit card.'

We will have to wait and see how firms tinker with prices to understand the impact of the change. But should airlines, holiday companies or any other retailer put up prices the best thing to do is shop around for a better deal.

Did you know that from tomorrow you can no longer be charged a fee by companies to use your card?

Here's everything you need to know about the card surcharge ban that's coming into affect. u27a1ufe0f https://t.co/GeK0Psh2K3pic.twitter.com/JU604n0LF2

u2014 Which? (@WhichUK) January 12, 2018

How companies could cheat the surcharges ban

Even if companies don't put prices up some may try to get around the ban by refusing to take card payments, imposing minimum spend limits or simply rebranding the fees.

Just Eat, for example, has been slammed for replacing its 50p card surcharge with a new 50p 'service charge' that applies however you wish to pay.

A spokesperson said: 'The 50p charge simply means that, along with our restaurant partners, we can continue to deliver the best possible takeaway experience. Applying the charge equally across the customer base ensures fairness for all.'

To fight back you should vote with your feet and avoid retailers that are trying to rip you off.

However, that won't be so easy for payments you have to make like your council tax and self-assessment tax bill.

Our research found just Elmbridge Borough Council said it would stop accepting credit cards because of the ban on surcharges. While Maldon District Council told us they would continue to take payments by credit card only if there was no alternative way to pay.

While HMRC has said it will no longer take credit card payments from 13th of January 2018, two-and-a-half weeks before the self-assessment tax payment deadline.

In 2015-16, 800,000 people paid their tax bill with a credit card and HMRC collected £13.2m in surcharge fees.

If you were planning to pay your tax bill with a credit card you will need to act soon. You'll still be able to use business credit cards, debit cards, direct debit, faster payment or BACs. But if you miss out and don't have an alternative way to pay you should contact HMRC as soon as possible as you may be able to set up a plan to pay by instalments.

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Who is responsible for enforcing the surcharges ban?

It will be up to local Trading Standards teams to look into any complaints about businesses still charging for card payments.

However, the Chartered Trading Standards Institute (CTSI) the organisation which represents local trading standards professional in the UK has warned that its members will find it hard to enforce the new law.

A spokesperson commented: 'With no extra funding, budgets cut by over 56% within a decade and 250+ pieces of legislation to enforce and consider - it is unlikely to be a priority for any local Trading Standards.'

So, small businesses could potentially fall through the cracks and get away with continuing to charge for card payments. This means it's up to us to challenge them on it.

If you spot any firm adding a surcharge for payments you should report it. You can find your local Trading Standards office contact details on the government website.

Is the surcharges ban good news for consumers?

Which? has campaigned for an end to rip-off card fees since 2010.

In the past firms would charge as much as 5% for paying on a credit card even though actual cost of taking the payment was much less. In 2010 alone consumers spent £473m on such charges, according to estimates by the Treasury.

In 2011, we launched a super complaint which resulted in providers only being allowed to pass on 'reasonable' processing costs to customers.

However, some firms notably travel companies, continued to charge excessive fees off up to 3% - well above the true cost of handling these payments.

Gareth Shaw, Which? Money Expert said: 'This ban should finally stop consumers being penalised simply for using their card. However, people will be wary if it results in price increases, minimum spend limits or even cards being refused by retailers.

'The Government and regulator need to closely monitor the effectiveness of the ban - and the fees banks charge retailers for card payments - to ensure that it has the positive impact for consumers originally intended.