Skift Take

There's a difference between breaking up costs to keep prices lower for consumers and adding them back in as exorbitant fees to gouge them as many operators have done with credit card fees.

Exorbitant credit card fees on holidays, travel and financial services are set to be outlawed by the Government.

A consultation to be launched on Monday by the Department of Business will go further than a scheme drawn up by the European Union.

The EU Consumer Rights Directive proposed capping credit card fees on train and plane fares to the amount airlines and train operators are themselves charged for using the service.

However ministers also want to extend this to also cover services such as package holidays, gambling and buying insurance.

According to Which? Credit card companies normally charge retailers an average of one per cent of the total transaction.

However airlines charge a minimum of £4.50, and in the case of Ryanair, £6.

On cheaper fares, this is a way of budget airlines increasing the money they make from each ticket at the expense of the passenger.

Far more substantial profits are made by package tour operators where credit card fees of 2.5 per cent are not uncommon.

A survey of 188 package tour companies by Which? earlier this year found that 83 were imposing unavoidable card charges on customers.

Transaction fees of at least 1.5 per cent are levied by some insurers.

Even the Driver and Vehicle and Licensing Agency imposes a credit card fee of £2.50 to buy car tax online.

“We want consumers to be able to pay for their goods and services without being hit by excessive hidden charges,” said Norman Lamb, the consumer affairs minister.

It can often be frustrating when purchasing a product or a service online, to find out only towards the end of the transaction that the final price is much higher due to things like payment surcharges.

“These proposals will stop companies from adding on these excessive charges, and allow consumers to see a clearer and more transparent breakdown of what they are paying for.”

The move was given a cautious welcome by Richard Lloyd, executive director of Which?

“Over 50,000 people supported our campaign to ban excessive fees so this well-overdue consultation is a step in the right direction.

“The Government must ensure that all businesses only charge the genuine cost they incur for processing the payment and that they are upfront, and make this clear to consumers.

We also want to see a robust enforcement regime in place to make sure firms are held to account if they flout the ban.

“The Government must now act quickly to meet its promise to ban these excessive charges by the end of the year.”

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Tags: creditcard, fees, money, uk

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