A new EU directive, The Payments Services Directive came into force on the 13th January 2018.  It makes it illegal for any businesses to charge extra for using a debit or credit card in the EU.  This new rule is being put into British law and so will not be affected by Brexit.

As we all know, there are many times we are asked to pay a surcharge for using our credit cards.  This is because businesses like to pass on their bank charges to the customer.

Many companies made a charge for using credit or debit cards, from holidays to train journeys, take away apps and concert tickets.  They were not the only ones. local councils, the DVLA and HMRC also made charges for paying on credit cards. Retailers, airlines, government departments and others used to levy a fee for paying by card, in some cases as much as 3%.

The ban is being hailed as a way to finally stop consumers being penalised for simply using their cards.  However, one money expert warns people to be wary if it results in price increases, minimum spend limits or even cards being refused by retailers.

He said, “The Government and regulator need to closely monitor the effectiveness of the ban – and the fees banks charge retailers for card payment to ensure that it has the positive impact for consumers originally intended.”

The ban on charges includes credit cards, American express, debit cards and linked ways of paying such as PayPal or Apple Pay.  Savings on more expensive items, such as holidays and flights should be good news.  However, it is almost certain retailers and businesses will try and recoup the costs to them in other ways.  Companies can instead add booking or admin fees to all forms of payment, raise prices or even refuse to accept cards at all.  Last week the takeaway food app, Just Eat, replaced its 50p surcharge on debit and credit card payments with a 50p service charge on all orders.

Local councils, HMRC and the DVLA will all have to change their payment policies.

The Economic Secretary to the Treasury, John Glen, said, “It’s completely unfair for someone to be hit by a hidden fee just before they are about to make a purchase, so by scrapping these rip-off charges we are helping to give power back to the consumer.”

“As we build a fairer society, this added transparency ensures buyers can make informed choices about how they spend their hard-earned money.”

Booking with a credit card is the safest option for paying for holidays.  Did you know that using a credit card on PayPal means you do not have any legal protection?

HMRC have taken a difference approach by banning the almost half a million people a year who pay their tax bills by credit card from doing so.  They will no longer accept any payment by credit card.  The timing of the ban is likely to cause problems for some of the 11 million people aiming to complete their annual tax returns by the 31st January deadline.

A partner at the national accountancy group, UHY Hacker Young, Andrew Snowdon, said: “it beggars belief that the HMRC would take such a customer-unfriendly approach – using a credit card many be the only way some taxpayers can afford to pay their tax bills. The ban comes at a tough time in the economy and is insensitive to say the least.  Instead of finding a way to implement the new rules, HMRC has simply dropped a mainstream payment method.”

HMRC sent out written warnings with tax bills earlier this month, saying: ‘From January 13, 2018, HMRC will no longer accept payment by personal credit card. Debit cards and corporate credit cards continue to be accepted.’

In 2016-2017, about £3million in credit card fees charged by banks were then passed on to customers by HMRC.  The taxman said absorbing the cost of these fees would damage its service and leave taxpayers worse off.

HMRC said: ‘New rules mean that we can no longer pass on what our bank charges for processing a credit card payment.  It would be unfair to expect other taxpayers to pick up this cost.  There a range of ways for people to pay us, depending on the type of tax being paid.’