As of January 13th 2018, it is against the law to charge an extra cost in addition to the advertised price for most retail payments (e.g. a card processing fee). This includes debit and credit card payments and also non–card based payments such as mobile phone payments, i.e. Apple Pay and such like. Electronic payments such as PayPal are also included.
Costs incurred by businesses for card processing must be included in the advertised price and not added as a surcharge at the end of the booking. Whilst this sounds great and will have positive impacts in a number of settings, as a small business trying to offer the best value to our customers it poses some questions.
We’ve always aimed to be fair with the payment methods we offer to our customers. As a small business, we are charged for every debit and credit card transaction we accept. The amounts vary by card but are around 2% for most credit cards. In the context of a package holiday, costing £1,000 or more, these fees can quickly mount up. Rather than just adding the 2% to all trips we have attempted to keep the cost down for those willing to pay by other methods (debit card or bank transfer) by passing on the 2% credit card fee to those opting to pay their balance by credit card (we have always absorbed the card fees on deposits). This gave you, as a customer, the option of either paying the lowest possible price, by debit card or bank transfer, or choosing to pay slightly more to pay by credit card.
On January 13th, the law within the EU changes (Payment Services Regulations 2017), and companies will no longer be able to add card fees to the advertised price of their products. The regulations also disallow providing “cash incentives” to customers who pay by preferred means.
We believe that in many ways this is a positive step in creating extra transparency, particularly when businesses only offer options that incur a “payment fee/card fee” etc. For example, low-cost airlines, who only offer credit or debit card payment, but insist on fees for paying by either option!
It does, however, leave us exposed as a small business and in a position whereby we either have to increase our base price for everyone or not accept credit cards at all.
Going forward we are scrapping the 2% credit card fee to customers for balance payments and do not intend to pass this cost on to our customers by increasing prices for 2018.
We understand there are certain benefits of using credit cards as a consumer, whether percentages of cash-back or extra protections offered, but essentially credit card companies pass these costs on to businesses through higher credit card fees charged, so we, in turn, must factor these costs into our products or refuse to accept that form of payment. We have already put in place an external mechanism for 100% financial protection through our membership of the Travel Trust Association, whereby any funds paid to us are held in trust and guaranteed up to £11,000 per passenger.
We hope that, as a small business, people are willing to consider alternative payment options to credit cards so we are able to keep costs low for everybody. After this trial period, we will need to consider whether offering payments for full balance amounts by credit card is a viable option for us going forward.
Are you more likely to pay for a holiday by debit or credit card? Did you know it costs more for businesses to accept your credit card payment? (costs that at some stage will likely be passed back to you as the customer). Tell us what you think.