Cutting the price of plastic
From next year the ‘rip-off’ fees we are charged for using credit or debit cards will be banned. NADA FARHOUD reports
THEY are those little additions to your payment when you are buying concert tickets, flights, takeaways, insurance or, in some cases, even when you are making payments to your local council or the Government. But from next year agencies are to be banned from fleecing customers with “rip-off” fees when using credit and debit cards.
New Treasury rules will prevent retailers from adding the hidden charges at the checkout, a practice which particularly drives up the cost of goods and services bought online, with businesses arguing that the extra fee – usually 2-3% – covers the cost of processing the card payment.
Stephen Barclay, Economic Secretary to the Treasury, said this week: “Rip-off charges have no place in modern Britain and that is why card charging is about to come to an end.”
The new rules are to be implemented in January. But here, consumer experts offer tips on how to avoid stealth charges when paying on plastic...
WHAT IS THE NEW LAW
CURRENTLY, fees are added to payments made on credit and debit cards, with airlines and holiday companies among the worst offenders – levying fees of up to 3% for using plastic.
All such fees will be banned in the new year. This means as well as the travel industry, ticket-booking websites, universities, corner shops and takeaway apps, plus services such as PayPal, will all be stopped from imposing the fees – which vastly inflate the cost of cheaper items.
Government agencies, such as the DVLA and local authorities, will also be subject to the ban.
The Treasury said firms caught breaking the law will be forced to reimburse customers and face fines.
HOW CAN I AVOID FEES?
JAMES DALEY, of consumer group Fairer Finance, which started the Red Card for Card Charges campaign, says: “Shopping around is key. Since I started my campaign, Monarch has scrapped its 3% fee, Virgin Atlantic dropped its 1.5% levy and easyJet reduced its fee from 2% to 1%.
“If booking an expensive holiday, these fees will add up and won’t be obvious until you examine the payment page, so do your homework first.
“Also, if you are using a service provided by a local government, such as pest control, compare the fees charged by private firms, as often savings can be made.”
HOLIDAY CARD CHARGES
HOLIDAYMAKERS could lose as much as £634m this year when using credit and debit cards to withdraw at cash machines or when buying goods abroad. Making payments in pounds rather than the local currency at shops, restaurants and even at cash machines leaves tourists out of pocket after they are tempted into a poorer exchange rate.
The practice, known as “dynamic currency conversion”, allows retailers and foreign banks to set their own conversion levels – adding up to 10% on bills.
The cost of paying in pounds on cards while abroad is the equivalent to £100 per trip for each person.
Fees average 6% per transaction but can be has high as 10%.
Banks also charge holidaymakers to use cards abroad, with average fees of 2.8% for debit and 3.5% for credit cards.
Some £190m in fees will be paid by Brits for withdrawing cash, says foreign exchange firm FairFX.
The average ATM fee is 2.9% for debit cards and 4.9% on credit.
HOW TO AVOID FEES ON HOLIDAY
IAN STRAFFORD-TAYLOR, chief executive of FairFX, shares his tips...
If you’re asked what currency you want to pay in, always choose local currency – the same if you’re using an ATM.
Be vigilant. If you’re billed in pounds, refuse it. Write “DCC rejected” on the receipt and insist on being charged in local currency.
Debit and credit cards are a good back-up for travel money but if you want to guarantee your rate, use a prepaid currency card which locks in your exchange rate when you buy.
If you’re using a prepaid currency card loaded with pounds, always choose to pay in local currency to