The government is going ahead with plans to limit card charges and make them more transparent.
The regulations will mean that companies have to show any card charges up front and they aren’t allowed to make a profit on them. The plan goes further than EU proposals put forward for air and rail fares to include services such as package holidays, gambling and buying insurance. In July 2012 the OFT forced a number of airlines to show card fees in their headline prices as part of this process.
At present overcharging for credit card processing is widespread. Banks charge retailers around 1% of the total transaction (though this is higher for smaller retailers), however the fees charged to consumers are considerably higher.
Most insurers charge a 1.5% fee as standard, many package holidays come with a 2.5% fee and elsewhere fees are even higher. The DVLA, a government department charges £2.50 per transaction, some councils charge 3% but the main offenders are the airlines with most charging £4.50 per transaction and Ryanair £6 (per traveller). It seems that airlines are trying to make the most of the window before the ban by charging up to 240x the actual processing cost.
The decision was made last December to combat the charges after a campaign by consumer interest group Which? to bann excessive fees which attracted 50,000 signatures.
Consumers have become more and more annoyed at having to pay credit card fees which translate as pure profit for the merchant. The fees are often unavoidable and are only shown at the end of the transaction.
The current plan is to end the excessive charges and increase transparency by the end of 2012. No doubt then the main culprits such as the airlines will have to apply higher charges elsewhere. Maybe we will see some airlines charging to use the toilet. If the charges are applied elsewhere at least they will be transparent and have to be justified to the customer.
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