Airlines ‘harvest millions’ in rip-off credit card fees

Councils also overcharge those paying with plastic, claims report

CUSTOMERS are being ‘fleeced’ by businesses charging them high fees to use their credit cards, it was claimed last night.

The charge to pay with plastic is meant to be around 0.6 per cent of the purchase price.

But firms are often charging as much as 3 per cent, a damning investigation has found.

Last night one MP described this as a ‘scam’, while the report says it is a clear breach of regulations that stipulate businesses can only pass on the costs they incur when processing card payments.

The consumer group behind the report says firms are also ignoring a cap on rip-off charges introduced across the EU in December. The worst offenders include big brands such as Flybe, Monarch, Swinton Insurance and Ryanair, who charge between 2 per cent and 3 per cent to pay by credit card.

South Cambridgeshire, West Dorset and Ealing councils are all charging up to 2.5 per cent when residents use credit cards to pay for council tax or services such as parking permits and planning fees.

Universities including Queen Mary of London also charge 2 per cent, as does motoring group RAC.

Last night firms and local authorities were accused of ‘harvesting’ millions of pounds in extra profits under ‘false pretences’.

Last year, an edict from Brussels capped the ‘interchange fee’ – the largest part of the cost of processing a card payment – which is charged by card firms such as MasterCard and Visa to the bank, when a payment is made by card. The bank then passes on the charge to the firm collecting the payment.

Interchange fees are now capped at 0.3 per cent for credit cards and 0.2 per cent for debit cards. Previously banks charged anything up to 2 per cent of the purchase price. Industry experts say additional costs such as renting payment terminals should amount to no more than an extra 0.3 per cent, meaning consumers should now be charged no more than around 0.6 per cent.

The cap means firms will save billions of pounds in fees – which should be passed on to customers.

But some are still charging four to five times this amount, according to the study by Fairer Finance.

Group managing director James Daley said hundreds of organisations are ‘in breach of the regulations’.

He said: ‘Taking people’s money is a basic part of doing business. In our view, companies should not be charging consumers anything for that. However, if they choose to charge for accepting credit card payments – in spite of the strong public sentiment against these charges – the rules make it clear that they can only pass on the cost.’

Mr Daley said regulator Trading Standards appears to be turning a blind eye and urged officers to launch a nationwide crackdown.

He added: ‘Given that many companies in Europe already have a total ban on these types of charges, it’s hard to see how companies can justify them.’

Guy Anker, from consumer website MoneySavingExpert, said: ‘Companies ... are ripping off their customers. It’s very simple. People need to punish them by voting with their feet and avoiding these companies.’

Some £13.4billion was spent on credit and debit cards last year – and customers have paid billions in card charges over the years.

MasterCard is facing a claim of up to £19billion in damages after allegedly setting unlawfully high interchange fees for 16 years.

The claim is being led by former financial services ombudsman Walter Merricks. If successful, millions of Britons could get more than £450 each.

A Ryanair spokesman said: ‘These claims are false. We fully comply with all EU regulations and our credit card charge reflects the cost of processing card payments.’

Flybe said it is ‘fully complaint’ with the regulations. The councils did not respond to request for comment.