Will credit card transaction costs come down?
Many people will know the feeling of making a purchase online using their credit card or debit card and then finding out that there is an extortionate ‘administration’ fee, which bumps up the cost of their purchase simply because they are using a card to make payment. One airline, for example, charges a whopping £20 administration fee each way for booking by card, which means £40 per booking for a return trip.
For many people this really bumps up the cost of purchases that they are making. The issue has become so big now that the consumer group Which? has launched a super-complaint about the surcharges that are applied by some retailers and companies. The Office of Fair Trading is now looking to investigate these fees and surcharges to determine whether they should be reduce or ban the practice of charging over the odds.
It is claimed that the actual administrative cost to companies to process these transactions is just 20 pence, with the maximum being 2 percent of the total transaction value. Yet some companies are charging far more than this to the customer. Officials are concerned that consumers are being ripped off by these charges, which cannot be justified.
An official from Which? stated: “Consumers are really fed up with paying excessive card charges. So far, over 40,000 people have pledged their support for our campaign to bring these to an end. Low-cost airlines are some of the worst offenders but these card surcharges are becoming ever more widespread, with everyone from cinemas and cabs to hotels and local authorities getting in on the act.”
The UK Payments Association argued that the Which? information was not accurate because charges were per transaction and not per item.
A spokesperson for the association said: “The credit card costs are per transaction. If you are booking six tickets at once, or one ticket in one credit card booking, the processing costs would be the same. It’s hard to see how companies can charge per item.”
