UK to ban excessive credit card fees

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UK Government plans to ban excessive charges levied by credit card companies

UK government bans excessive card fees charged by Airlines, travel companies and retailers when people pay using credit or debit cards by the end of 2012. Customers are being charged as much as ?12 when they use their cards to make the payment even though the transactions cost as little as 20p to process. In some cases, the fees are higher than the value of the item being purchased. Some local authorities and the DVLA also levy charges, so as many trains, ferries, theatre and cinema ticket merchants.

The European Union is to ban excessive card fees levied by airlines from 2014. However, the British ban will be enforced sooner and go significantly further.

Mark Hoban, the financial secretary to the Treasury, said, ?We?re leading the way in Europe by stopping this practice. The Government remains committed to helping consumers get a good deal in these difficult times. Consumers are sick of the rip-off culture and we are determined to do what we can to end it.?

Over the past few years, there was a sharp increase in card surcharges particularly among low-cost airlines, who were among the first to bring in the levies. In many cases, the charge is only disclosed at the end of the process thus making it difficult for consumers to compare prices.

Ministers intervened after Which?, the consumer watchdog, complained about the fees to the Office of Fair Trading (OFT). Richard Lloyd, the executive director of Which?, said, ?The Government?s decision to ban rip-off debit and credit card surcharges is a huge victory for consumers.?

Companies levying the fees, however, insisted that the fees are necessary to cover costs. All banks charge retailers a ?merchant fee? for processing payments by debit and credit cards. Most banks refuse to disclose the amount charged because it often depends on the size of the retailers and volume of transactions. In addition, credit card payments cost more than debit card payments due to the charges associated with borrowing.

There may also be extra security costs borne by the retailer in processing online card transactions. A spokesman for the UK Payments Association said, ?The credit card costs are per transaction.?

The move to ban credit card fees could save consumers millions of pounds a year.

Sources: BBC, Telegraph.co.uk

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