U.K. Credit Card Surcharges Ban and Effect on Business World

It is said that On January 13, charging debit and credit card users extra was banned in the U.K. Essentially, a credit card surcharge is an additional fee added to the transaction for the convenience of using that payment method – a “penalty” or “tax” of sorts. This extra cost was often thrown in at the end of the process of buying something online or in a small shop. Take-away food apps and ticket booking sites are just a couple of business types that commonly used surcharges. Electronic payments expert Taylor Cole has explained in his recent blog post on Bestpaymentproviders as stated that It will be illegal from next year to charge customers in the UK a fee to use a credit card, the government said. Businesses from corner shops to airlines routinely charge customers a fee for paying with a credit card, and in some cases even for paying with a debit card or the payment service PayPal.

So, this ban is a good thing, right? While the U.K. Treasury was adamant that the policy would not lead to any surprises for consumers, a few effects of this policy have already begun to emerge:

The Policy Could Lead to Businesses Circumventing the Ban

Just days before the U.K. banned businesses from tacking on surcharges to customers purchases, food delivery company Just Eat introduced a new “service charge”; this blanket “service charge” applies to all orders, regardless of payment type (credit, debit or cash). To accept credit cards, businesses are required to give about 3 percent of their sales to credit card companies for processing costs. In light of this, many are now saying that businesses like Just Eat should not be forced to absorb these costs when it is the consumer choosing to pay with their credit card. Even though the U.K. Treasury assured that “that there won’t be any nasty surprises, and they [consumers] won’t be penalized for wanting to pay in a particular way”, businesses are now having to consider raising prices to deal with the ban.

Some Companies are Removing Credit Card Acceptance

To make matters worse, some businesses and government agencies are considering or choosing to do away with credit card acceptance altogether. TheFinancial Times reported that HM Revenue & Customs, the U.K.’s tax, payments and customs authority, has stopped accepting credit card payments in response to the rules; thus forcing taxpayers to forgo the convenience and rewards of their cards.

The Ban is Damaging to Low-Income Customers

As businesses opt to get rid of credit card acceptance, the consumers most affected will be low-income consumers who typically pay with cash. Consider the new “service charge” Just Eat recently introduced. This means cash payers will be the ones subsidizing credit card users. Before, the processing costs were passed along to the credit card users.Experts warn that the affects of the surcharge ban could have a damaging economic impact.

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