British retailers will soon be disallowed from imposing surcharges to customers whenever they pay via credit cards.
U.K.’s Treasury Ministry on Wednesday announced the new rules. Economic Secretary to the Treasury Ministry Stephen Barclay said: “Rip-off charges have no place in a modern Britain.”
Consumers in Britain at times face steep surcharges to as much as 20 percent when using their credit cards such as airfare purchases. The new rule will take effect in January and will also be applied to government agencies.
The rule is expected to give consumers some savings. Barclay said: “These small charges can really add up and this charge will mean shoppers across the country have that bit of extra cash to spend on the things that matter to them.
Here in the U.S., according to the National Council of State Legislatures, at least 11 states do not allow retailers from adding surcharges to credit card transactions. But many U.S. retailers, however, are allowed to charge customers a surcharge for using credit card instead of paying in cash. There are also some states that outlaw surcharges and allow stores to give discounts to shoppers for using cash.
New York is one of the states to ban surcharges but the Supreme Court in March gave a partial victory to merchants who challenged the law on the grounds that it could be seen as regulating free speech, as the New York law prevents retailers from telling customers about the surcharge. An appeals court ruled that the said law was a price regulation, but the case is set to return to lower courts for further arguments and review.
In 2012, credit card companies Visa and MasterCard, along with big banks such as JP Morgan Chase & Co. And Citibank was compelled to pay around $6 billion to settle a lawsuit from retailers who said the companies had conspired to raise the fees they charge merchants.
The British government, on the other end, is also looking to further limit the costs of processing payments that credit card companies impose on retailers. The move will allow British consumers to save hundreds of millions of dollars. In 2010, the total value of surcharges for debit and credit cards was estimated at 473 million pounds- at least $700 million at that time.