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The Government has announced that extra fees for paying by debit or credit card will be banned from next year, in a move that could save consumers hundreds of millions of pounds.
Currently, many retailers charge customers for paying by card, particularly when making online purchases, while some smaller shops will also charge a fee for card payments on the high street. This is because banks typically charge large retailers around 10-20p for each debit card transaction, or a flat fee of 0.6% for credit cards.
The Government says that, while many industries have absorbed those costs, some pass them onto consumers in a practice known as 'surcharging' – the biggest offenders are airlines and takeaway apps, where people can be charged up to 20% just for paying by card – but this will be brought to an end in January 2018.
It could make a big difference, too. After all, the value of surcharges for card payments totalled an estimated £473 million in 2010, and it's hoped that axing the charge "will mean shoppers across the country have that bit of extra cash to spend on the things that matter to them," said the Economic Secretary to the Treasury, Stephen Barclay.
"Rip-off charges have no place in a modern Britain, and that's why card charging in Britain is about to come to an end. This is about fairness and transparency, and so from next year there will be no more nasty surprises for people at the check-out just for using a card."
This will apply to all MasterCard, Visa, American Express and even PayPal payments, so from next year, you can be safe in the knowledge that you can pay by plastic wherever you are and won't be charged extra.
However, there are concerns that customers could still pay for it – after all, the retailers themselves will still be charged, so those retailers may simply decide to bump up their prices instead.
"It's fantastic news that consumers will no longer see surcharges added to card payments from next year, but there is a danger that companies could now just increase the price of goods to cover the costs," said Rachel Springall, finance expert at Moneyfacts. "This is why consumers should query any extra costs that they are unsure of either in store or online."
Even when the ban does come into force, you'll need to make sure you're using your cards wisely. You may be saving money on fees, but why not go further than that to save money on interest? Opting for a credit card that charges 0% on purchases would be ideal, giving you time to pay off the balance without adding to the cost.
Or, you may want to opt for a reward or cashback credit card that can give you something back from every spend. This should only be an option for those who can comfortably pay off the balance each month – otherwise you could be charged interest which would completely outweigh any other benefits – but if you can, it could well be worth it.
Whatever kind of card you use, just make sure you don't get into unmanageable debt by only spending what you can afford, and check that your credit score is up to scratch before you apply. That way, you can truly benefit from the end of rip-off fees.
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