Card Surcharge Ban: Understanding the Changes and Its Impact

The Background

Before the ban, merchants were allowed to add surcharges to cover the cost of processing card payments. These fees could be as high as 20% and were often used to deter customers from using cards, forcing them to pay with cash instead.

The European Union Directive

The European Union introduced a directive in 2015 to eliminate surcharges for card payments. The directive stated that businesses were only allowed to charge customers the cost of processing the transaction and not a percentage fee. This directive was implemented in the UK in January 2018 to make card payments fairer for consumers.

The Implementation of the Ban

From January 2018, it became illegal for businesses to charge customers a surcharge for paying with their credit or debit card. Businesses that failed to comply with this law could face a fine of up to £5,000. The ban applied to all types of cards, including American Express, Visa, and Mastercard.

The Impact on Consumers

The card surcharge ban has been welcomed by consumers, who no longer have to pay extra fees when using their cards to make purchases. This has made it easier and more convenient for consumers to pay for goods and services, especially online purchases.

The Impact on Businesses

The card surcharge ban has hit small businesses hard, as they often rely on surcharges to cover the cost of processing card payments. As a result, these businesses are now forced to absorb the cost of card processing or find alternative ways to cover these expenses. This can be difficult for small businesses, as they often have tight profit margins.

The Alternatives for Businesses

One of the alternatives for businesses to cover the cost of card processing is to increase their prices across the board. However, this can be a risky move, as the price increases may put customers off. Another option is to introduce a minimum spend for card payments, which can encourage customers to pay with cash instead.

The card surcharge ban has significantly impacted both consumers and businesses. While consumers are no longer being charged extra fees for using their cards, small businesses are struggling to cover the cost of card processing. As we move forward, businesses need to find alternative ways to cover these costs without putting additional financial strain on consumers.

Streamline your payment processing and boost your business with our card payment solutions. Let’s get you started today.