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Friday, December 23, 2011

Government comes down hard on credit card charges

This morning's Telegraph reports that airlines, travel companies and retailers are to be banned from charging fees when people pay by credit or debit cards.

This is because the Government has lost patience with companies who charge customers as much as £12 to use their cards when they pay, even though the transactions cost as little as 20p to process. They add that in some cases, the surcharges are higher than the value of the item being purchased. Legislation is to be introduced at the end of next year:

Over the past few years, card surcharges have risen sharply particularly among low-cost airlines, who were among the first to bring in the levies.

The cost of booking a Ryanair return flight with a debit card has risen 15-fold to £12 since 2004.

The charges have now spread to many other areas including cinema tickets, utility bills, holidays and even some government departments. The DVLA and HM Revenue and Customs charge extra for credit card payments.

Consumer experts say Toyota levied a £75 fee to buy a car with a credit card. The fees are believed to cost consumers hundreds of millions of pounds a year.

In many cases, the charge is only disclosed during the closing stages of the booking process, making it difficult for consumers to compare prices.

Ministers intervened after Which?, the consumer watchdog, complained about the fees to the Office of Fair Trading (OFT), the regulator.

In June, the OFT found that the fees were detrimental to consumers and proposed that firms should be more open about the levies.

This is an issue I have taken up in the past. I am pleased that the Government has listened to Which? and the OFT and is taking action.
ru aware Peter that credit card companies take a % from the vendor for each credit card payment?

If for example there is a government fee that a vendor has to pay on behalf of his/her client of say two thousand pounds, the vendor loses out even though the fee is not the vendor's fee.

It seems some politicians are unaware that vendors lose out on credit card payments verses a cash payment.

Vendors will end up either charging an admin fee or putting up their prices which will hurt non-credit card payers who are often less well off.

I understand that credit card companies rip people off, but they also rip off vendors. In my case I often have to pay about five hundred in fees to the government on behalf of a client - if the client pays with a credit card my small business ends up out of pocket. Sometimes the government fees are about two thousand; I end up fifty or so out of pocket.
Yes, I am aware and if you follow the link to press release at the bottom of the article you will see that this is acknowledged. Vendors can be charged up to 2% of the purchase price by a credit card company and I have no problem with this cost being passed onto the customer. I believe that the government takes the same view.

I have often purchased something with a credit card and had to pay the extra because of my method of payment.

The problem is where excessive administration fees are charged and this is what is to be regulated.
Peter, perhaps some UK politicians don't recall that in the UK petrol stations started to charge credit card customers more to take into account the credit card charge to the vendor (petrol station/operator) and guess what ... THIS WAS STOPPED

... so credit card customers were once again charged the same as cash customers and so cash customers ended up subsidizing credit card users. I can't recall if it was the government who stopped this or the credit card companies themselves, but it was STOPPED.

It seems some UK politicians’ are both dumb and forgetful. (This remark is not aimed at you Peter, you do understand this issue.)
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