11 August 2016

Why are we still being charged for paying by credit card?

James Daley

By James Daley LinkedIn

Fairer Finance has launched a new campaign to put a stop to charges for paying by credit card. We believe its already against the rules - and it's time for government agencies to start enforcing.

Five years ago, while I was still working at the consumer group Which?, I launched a campaign to stop companies charging consumers for paying by debit or credit card.

Back then, the likes of Ryanair were charging people £6 per person, per leg of their journey. That meant a family of four had to pay an extra £48 in card charges - whether they were paying by debit or credit card. This was outrageous as we knew that the cost of processing a debit card transaction was just a few pence.

Our campaign ended in success - with the government introducing new rules which stated that companies can only pass on the costs of processing a card transaction, and no more. This pretty much put an end to debit card charges. But most airlines and travel companies continued to charge people who pay by credit card.

Accepting a credit card transaction is slightly more expensive. And the cost varies according to how many transactions you process a year. But industry experts have told us that for large companies, the total cost should not be anymore than around 0.6%.

Card fees capped

Until a few months ago, many airlines were still charging upwards of 2% for paying by card. But a new EU ruling in December capped "interchange fees" - which make up the largest part of the card transaction cost. These were capped at 0.3% for credit card transactions.

Many airlines responded by cutting their card charges. Jet 2, for example, axed card fees altogether in December. Easyjet cut its credit card charge from 2% to 1%.

But a number of companies held firm. Flybe and Monarch are both charging an astonishing 3% for paying by credit card. While Swinton insurance charges 2.5%, and Ryanair charges 2%. We've found over 100 companies that are charging fees in excess of 1% - and we believe this is the tip of the iceberg.

Worse still, many Councils are charging over 2% to accept credit card payments. These include the likes of Ealing, West Dorset and South Cambridgeshire - who all charge 2.5%.

The true cost for each of these organisations will be different. But the variability in the charges highlights that some companies are not playing straight by the rules.

If Easyjet is charging 1%, how can Ryanair justify charging double that?

What needs to happen?

We want to see Trading Standards stepping up and enforcing against companies who are ignoring the rules. We'd also like to see Ministers making a public example of these companies. That alone could be enough to get them in line.

But longer term, we'd like to see charges for paying by card banned altogether. Many countries in Europe have already done this - and there is European Union legislation on the slate which may force all EU countries to follow suit. Whether we're in or out of Europe, we should ban these charges.

Taking people's money is a basic cost of doing business. People often forget that it costs money - a lot of money - to take people's cash. Once you've handed it over at the till, it has to be counted, boxed up, and securely delivered to a bank. But you couldn't imagine a company charging you a fee for paying in notes and coins. 

Card payments are much cheaper, so how have we reached a world where companies think it's ok to charge us for taking money in this way?

What can I do?

If you've been hit with a high fee for paying by card, we'd recommend you challenge it. Complain to the company, and threaten to report them to Trading Standards.

If you've got the time and patience, then why not take them to the Small Claims Court? They will have to justify that what they are charging is proportionate to their costs - and we don't think any of the companies in our Hall of Shame could do that.

Write to Margot James, the Parliamentary Under Secretary of State with responsibility for Consumer Affairs. She has the power to get the rules changed - so that companies can no longer charge us.

And please do write to us and tell us who's still charging. You can email us at fairerfinance@fairerfinance.com. Better still, tweet about it - and include our Twitter handle @fairerfinance, as well as the Twitter handle of the company you're calling out.

This is a campaign we know we can win with your support. Let's show the red card to card charges.

Read more related articles

27 July 2016

FCA lets the credit card industry off the hook

The FCA's credit card market study was a long time coming. But there's little in there that will address the lack of transparency and irresponsible lending in the sector.

1 February 2016

Are airlines still overcharging us for paying by card?

It's almost four years since rules came in to stop companies penalising their customers for paying by card. But new evidence suggests that many travel companies may never have abided with the rules.

2 June 2015

Has your bank been picking your pocket while you’re on your holidays?

Banks and credit card companies continue to charge far too much for using your plastic overseas. It's time for the regulator to get involved.