As of January next year businesses can’t add any surcharges for card payments, according to new rules from the UK Government. Treasury estimates say that such surcharges totalled £473m in 2010. And that figure has doubtless increased since then.
The new rules reflect a directive from the European Union which bans surcharges on Visa and Mastercard payments.
But the British Government has gone further than the EU by also banning charges when paying with American Express and Paypal too.
When it comes to surcharges, you see it all over the place, but apparently the notable offenders are airlines and food delivery apps. And, of course, some small businesses will typically add a fee for cards: the pub, the corner shop and in general. My local offie up the road charges 40p. Both Hungryhouse and Just Eat apparently add 50p as a matter of course.
But they’re not the only offenders: many local authorities levy charges of around 2.5% on council tax payments and the DVLA charges £2.50 for a card payment. Government bodies will also have to comply from January.
Obviously the argument will go that such fees for processing cards will now be factored into the price and prices will increase. That strikes us as the sensible option. After all, we don’t pay a fee to a shop because they’ve turned the lights on so we can see the goods we want to buy. Businesses should consider all the costs of doing business and price goods and services accordingly.
And then consider the unstoppable emerging trend towards contactless card payments. Those millennial, and others, consumers often don’t seem to be holding finest folding. Why should they be penalised?
Such surcharges have for a long time been a ‘conversion tariff’ on a successful sale: in essence a penalty because you want to buy something and pay by card. I personally find the ‘minimum spend’ fee particularly egregious. In my local pub you pay 50p if you spend less than £8.50 in an individual transaction on a card. When I think of what I’ve spent over the years there, that’s a rather insulting take on occasion. Cash does, in its own way, have its own processing cost too. It must be counted and banked, after all.
The best bit of advice for businesses is to reassess your payments processing provider. The old school providers charge per transaction, also take a monthly fee and there can even be an additional expense in keeping and maintaining the handset. The new generation of payments providers are often much cheaper and can easily operate on your premise’s wifi. It seems likely that they will benefit from the changes.
Is this a good new rule or a bad thing? You tell us.