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‘Rip-off’ card charges to be outlawed from January

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‘Rip-off’ charges for credit cards are to be banned, under new rules to come in by January 2018.

Retailers charge up to 5% for paying with a credit card rather than a debit card or cash. The Treasury has announced that retailers will no longer be allowed to levy these fees.

This is good news for consumers. Data from the UK Cards Association showed that debit and credit cards were used to make 16.4 billion purchases in 2016 with a total £709bn spent by UK debit and credit card holders both domestically and overseas. Credit cards represented 25% of this total, amounting to £177bn.

The government said the move, which builds on an EU directive, would mean “shoppers across the country have that bit of extra cash to spend on the things that matter to them”. It added: “Surcharging’ is common practice across the country – with businesses ranging from takeaway apps to global airlines charging people to make card payments or for other services such as Paypal. While many industries have acted to absorb the cost and not pass these on to consumers, these rules will bring an end to the practice entirely.”

However, some commentators suggested that companies could raise their prices to compensate.

The biggest culprits appear to be the discount airlines, such as Ryanair and Easyjet, but the practice is commonplace and even applies to some government agencies. HMRC, for example, charges between 0.4% and 0.6% for using a credit card. A number of local authorities also impose handling fees for credit cards.

Money Advice Service money expert, Andrew Johnson said: “This is a positive move by the government, increasing transparency for consumers who want to shop around and get the best deal. Consumers should know exactly what they have to pay upfront and not face being hit with additional surcharges at the last minute. These surcharges have cost UK consumers millions of pounds a year with new legislation coming into effect from January 2018”.

Gareth Shaw, Which? money expert, said: “This welcome news is long overdue. Which? has been campaigning for an end to unfair card surcharges for years now, and triggered the process of reform with our super complaint back in 2011.

“Previous action to protect consumers from excessive card surcharges has been difficult to enforce, leaving consumers paying over the odds just for paying by card. These new rules will finally put an end to this unfair practice.” Which? has run a campaign to try and get these payments banned.”

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