Prices will start to take off, warn experts

FEARS are growing that the payback for the surcharge crackdown will be higher prices. Kevin Pratt, of financial website MoneySuperMarket, says: ‘In theory, banning surcharges is good news. But it will only be welcome in practice if retailers do not increase their prices to cover what they pay in fees to the card companies to process payments.’ Although the Government anticipates competition will restrain price rises, Pratt believes rises are inevitable. He says: ‘After all, we are in an inflationary environment, so relatively small price rises triggered by the ending of the surcharge will not stand out. Consumers should respond and shop around.’

Low cost airline Flybe currently charges 1 per cent for credit card purchases (2.5 per cent for payments made by American Express). While the company says it will comply with the surcharge ban it hints that fares could rise. A spokesman says: ‘The airline does not believe the ban on surcharges is in the best interests of consumers. It will inevitably result in price increases as businesses seek to recoup the costs of processing card payments and covering fraudulent transactions.

‘This will disadvantage the majority of those who now choose to pay for goods and services by cash or with a debit card.’

Rival Ryanair says: ‘Our current 2 per cent credit card charge reflects the cost of processing credit card payments, including bank charges. When the law changes we will comply with it as required – and we will continue to lower fares this year.’