Is the credit surcharge ban fair for small businesses?

posted by 3 years ago in News

Consumer groups have been celebrating the news that, from January next year, there will be a ban on businesses charging customers extra for paying by debit or credit card.

Currently companies can charge up to 20 per cent more for purchases such as flights just for paying with a credit card.

Small businesses are described as being amongst ‘the worst offenders’ alongside airlines and food delivery apps.

Businesses say the surcharge is to cover the cost of processing a card payment. Treasury figures estimate the total value of surcharges for debit and credit cards to be £473 million.

From January 2018 organisations, including councils, HMRC and other government agencies will be ordered to repay the fees.

Economic Secretary to the Treasury, Stephen Barclay said:

“Rip-off charges have no place in a modern Britain and that’s why card charging in Britain is about to come to an end.

“This is about fairness and transparency, and so from next year, there will be no more nasty surprises for people at the check-out just for using a card.

“These small charges can really add up and this change will mean shoppers across the country have that bit of extra cash to spend on the things that matter to them.”

However, there is concern about the impact that the changes will have on businesses that will still have to bear the cost of card payments.

Banks typically charge large retailers between 10p and 20p for each debit card transaction, or 0.6% for credit cards.

Previously the government has capped costs facing businesses for processing card payments. It has now said it will assess if there is any more that can be done to help retailers.

Head of Businesscomparison.com, Philip Brennan comments:

“Whilst this is a win for consumers it is important that the government work to help retailers who will still incur costs for card payments and have to pay a card payment facilities cost. Small businesses in particular work to very tight margins and measures such as this one could really affect their profits. Inflated charges for customers should never exist but it is worth bearing in mind that, whilst some small shops charge a fee for the use of a card they also have to pay more to the banks for processing such transactions. There hasn’t been transparency to demonstrate that what the consumer pays correlates to the cost that the company involved must pay. This is unfair to consumers and businesses.”