• Are you ready for the card surcharge ban from 2018 ?

  • Are you ready for the card surcharge ban from 2018?

    From 13th January 2018 it will be illegal for all merchants to charge consumers extra fees for choosing to pay by card.

    The Payment Services Directive (PSD2) has been introduced to stop merchants in the EU from imposing high fees for their customers to pay by a debit or credit card.

    Currently, under the Consumer Rights Act, merchants are allowed to pass on any card processing charges that they incur from their acquiring bank. Although this has been law since 2012 merchants have been regularly flaunting the rules, meaning the customer is overcharged and the merchant makes higher profits. This is the reason for the new directive and will affect all businesses, not just the large retailers.

    So how much does it actually cost the merchant?

    It will depend on when the merchant signed up for their service and who they bank with as there are no uniform fees. It’s also a competitive market with different payment providers trying to secure the business. Current market conditions, consumer debit cards are around 0.35% and credit cards about 0.8%. There is also an authorisation charge of around 3.5p for each transaction which looks up the customer’s card to verify funds are available and the card hasn’t been stolen. So a contactless debit card transaction for £15, should cost the merchant about 8p in processing fees. Merchants are not permitted to factor into the charge any terminal rental fees or PCI charges, just the direct banking fees to process the payment.

    Will we see price rises in our shops?

    Possibly, the retailers could refuse to accept card payments but this is unlikely due to the wide use and convenience of paying by card. They could absorb the costs, making less profit, or the more likely scenario of passing the costs on to the customer through an increase in the headline price, which is payable by all customers. Another option is for merchants to review their current deal and switch provider to secure more competitive transaction charges.

    Are minimum charges for using a card still permitted?

    Yes, some smaller retailers may impose a minimum spend of say £5 or £10 before they will accept a card. It will not be illegal to continue to do this, but as consumers gradually move away from using cash, business owners won’t be keen on the risk of losing business.

    Who will police the new rules?

    Trading Standards officers at local authorities will act on any complaints about any businesses who continue to impose card surcharges after 13 January 2018. However, they have limited resources. For that reason, many small shops may have got away with card surcharges under the current rules.

    As this comes from an EU Directive, will it still be law after Brexit in 2019?

    This directive has already been incorporated into UK law, following a vote in parliament in March. It will therefore remain law after March 2019, when the UK leaves the EU. However, as with all law, it could in theory be repealed at some point in the future.

    The Government estimates the cost savings for consumers will be approximately £166m per year.