News & Views - Savantor

Retailers and ‘excessive card surcharges’

Friday, 30 December 2011

Recent reports indicate that the UK government intends to ban what it calls "excessive" fees for using a debit or credit card to buy items such as travel or cinema tickets by the end of 2012.  The move comes amid complaints that organisations such as airlines, booking agencies and councils were imposing excessive charges for using a card.  Consumers buying a ticket online are often charged extra when they tick a box that says they intend to pay using a credit or debit card.  Examples of these charges are a £6 per person, per leg "administration fee" charged by Ryanair, an £8 per booking charge by EasyJet - plus 2.5% when using a credit card and £4.50 per booking credit card fee from British Airways.  Local authorities and the DVLA also levy charges, as do many train, ferry, theatre and cinema ticket merchants. The OFT estimates that in 2010 UK consumers spent around £300 million on payment surcharges in the airline sector alone.

The issue of high surcharges prompted Which? to call on the OFT to investigate, saying "the price you see should be the price you pay".  However, it accepted there could be an additional cost added for the cost to the retailer of accepting a card.  Which?, has said that debit card transactions cost the trader about 20p, and credit cards cost about 1% or 2% of the total price. 

We all know that the cost of processing transactions is nothing like that charged by retailers to the consumer so the real issue is to prevent retailers blaming credit card processing for their excessive charges which often were not revealed until after consumers have filled in a number of web pages during their purchase – the so called ‘drip pricing’.  What will happen is that retailers who do this will call the charge something else like an administration fee or will simply put the price up.  So in the end consumers will pay the same but at least there will be more transparency and credit cards will stop getting the blame.

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