Hidden Credit Card Charges To Be Blocked
The government is to block firms from using "hidden" credit and debit card surcharges to ramp up the price of flights, concert tickets and other goods, by 2012.
The move follows a call by the Office of Fair Trading (OFT) for the fees, often added in the final stages of a transaction, to be banned for debit cards.
Treasury Minister Mark Hoban said consumers should be able to see "up front" how much they will have to pay.
The ban will extend across all forms of payment, not just debit cards, and will cover most retail sectors.
Businesses will still be able to add a small charge to cover the cost of a payment method, but will not be able to load on excessive fees.
Hoban said: "We want consumers to be able to shop around. They have a right to understand the charges they may incur up front and not be hit through a hidden last-minute payment surcharge."
When it published the findings of an investigation earlier this year, OFT refused to name and shame the worst offenders but pointed out that easyJet charged £8 per debit or credit card transaction, while Ryanair added £6 per journey and Trainline charged £3.50 for a credit card transaction.
The OFT estimated that, in 2010, UK consumers spent around £300 million on payment surcharges in the airline sector alone.
A further two airlines - Lufthansa and Swiss - subsequently announced plans to charge credit card users £4.50 despite the OFT's report into the practice.
A European Union directive will ban businesses in many sectors, including airlines, from imposing above-cost surcharges on any form of payment from mid-2014 but the government intends to act faster than that timetable.
"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," Hoban said.
Consumer champion Which? submitted a "super-complaint", backed by thousands of supporters, to the OFT earlier this year and have claimed debit card surcharges were adding £265,000 a day to the cost of flights.
The OFT found considerable evidence of companies using "drip pricing" practices for surcharges online - adding payment charges to the total price only after consumers have filled in a number of web pages during their purchase - and warned the practice was spreading.
Which? executive director Richard Lloyd, said: "The government's decision to ban rip-off debit and credit card surcharges is a huge victory for consumers.
"This announcement goes further than the OFT's proposals, finally putting an end to these unfair and excessive charges.
"Over 50,000 people supported Which?'s campaign to see these fees stamped out.
"Given that airline passengers alone pay more than £265,000 a day in card surcharges, businesses shouldn't drag their feet over this.
"While the law will come into force at the end of 2012, we want companies to be upfront and fair over card charges today."
Which? estimates that when paying by debit card, the cost to the retailer is 10p to 20p.
The cost of a credit card charge to a retailer is calculated as a percentage of the value. Which? estimates the real cost of processing a credit card transaction is no more than 2% of the value of the purchase.
Hoban said consumers felt "ripped off" by the charges but would be able to complain to the Office of Fair Trading in future.
He told BBC Radio 4's Today programme on Friday: "I think consumers do feel ripped off by it. I wonder when I buy a ticket online just how much should I be paying."
Richard Lloyd, executive director of consumer magazine Which?, said government bodies must also stop adding on "excessive charges" and called on the changes to be brought in more quickly than planned, saying consumers "have waited too long for action on this".
But Hoban insisted the government needed to consult on the plans and pointed out the reforms would still be two years ahead of planned European Union changes cracking down on the practice.
He added: "There are already rules in place governing public bodies. There are rules that the Treasury has set out that say you can't recover more than the cost of the processing.
"So, for example, revenue and customs charge nothing if you use a debit card to settle a bill and charge about 1.4% if you use a credit card."