New UK Law Eliminates All Debit Card And Credit Card Charges For Online And In-Store Purchases

New UK Law Eliminates All Debit Card And Credit Card Charges For Online And In-Store Purchases

Starting January 13, no charges will be levied on usage of debit or credit card online or in shops in the UK.

The new regulations which are based on an EU directive means that customers will no longer have to pay any charges for using their cards online or in small shops. The charges have been removed for all types of online and in-store payments including American Express and other payment methods like Apple Pay.

Companies can however still levy a surcharge in cases when customers opt to pay by cash or cheque. Customers can also be charged new service fees provided the fees are applicable regardless of method of payment used.

Surcharge Continuing Despite Laws Against It

According to a set of rules enforced in 2013 companies cannot charge customers more than the cost incurred to process a credit or debit card payment.

However although the cost runs to just a few pence per transaction, companies regularly charge around 2 per cent, with surcharges of 50p still seen at some convenience shops and pubs, particularly on bills under £5 or £10.

Some of the government agencies, including the Driver and Vehicle Licensing Agency (DVLA), currently levy a “flat rate” of around £2.50 for card payments. Similarly, flight companies such as Flybe have charges of up to three per cent.

This can at times means that customers are being charged up to 20 per cent to pay by card.

New Rule Based On EU Directive

Under the new rules, all UK companies serving UK customers will need to follow the new law, which follows an EU directive.

As the rules are being written into UK law, they will remain in force after Brexit as well.

Announcing the rules, Stephen Barclay, economic secretary to the Treasury said that “rip-off charges” have no place in “a modern Britain” and that why such charges were coming to an end.

Companies May Hike Prices

Customers will naturally benefit from not having to pay the surcharge while using their cards, but experts have warned that banning surcharges can lead to companies hiking prices or incorporating the charges through other methods

Some small businesses may even stop taking cards completely.

According to Andrew Hagger, a consumer finance expert at Moneycomms, while the new rules were “a good move”, though “long overdue”, there was a downside that the companies may lose the revenue that they were receiving from it. Companies are likely to “look elsewhere” to recoup it, he said.

Recently a takeaway delivery service Just Eat was criticised over its move to introduce a 50p “service charge” shortly after their 50p card surcharge was withdrawn

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