Card charge ban is now in effect

Retailers can no longer charge customers for making small card transactions.

The EU Payment Services Directive came into effect at midnight on January 13 and means that retailers can face punishment from local trading standards departments for charging customers for card transactions.

While card payments are free for consumers, retailers will continue to pay card transaction fees from their payment providers. This continues despite an earlier EU cap on wholesale transaction charges paid by the transaction providers to banks.

Retailers have adopted varied approaches to cover card costs. These include increasing the prices of key lines, introducing minimum spends on card payments,  renegotiating rates with their payments provider and some have swallowed the cost in order to keep customers satisfied.

Adam Hogwood from Budgens of Broadstairs commented on the Retail Express forum: “We should make ourselves as accessible as possible to as many people as possible – charging can alienate and ruin repeat trade. I avoid shops where I'll get charged for using my card in any way.”

Research by Paymentsense shows one in four customers avoids stores where they are charged for using their card, some retailers have speculated that high minimum unit pricing could do the same, especially if a multiple owned store is located nearby.

There is concern that many retailers are unaware of the change in legislation, with two in five retailers reporting no change in December in the number of small stores charging a card transaction fee.

Retailers are still able to charge for cashback, though there are generally no transaction fees associated with withdrawals by customers.

Contactless transactions now account for 50% of transactions under £30 according to BarclayCard.