MarketLine Blog

UK Government to Swipe Charges from Merchants


Swipe charges have long been the subject of heated debate, with many consumers in the UK voicing their anger at what they deem to be excessive stealth charges.

As a result, the UK government, via the Office of Fair Trading, (OFT) launched an investigation into the charges levied by merchants when customers pay by either credit or debit card. Last December, the OFT announced plans to stop retailers imposing excessive or surprise surcharges and this week, the government announced plans to push ahead with the plan.

The proposals will make it a legal requirement for retailers, airlines and the like, to make sure their card charges are clearly stated before the payment is made and will also make it illegal for traders to charge their customers more than it costs them to process the payment. The government is hopeful that the new laws will be in force by January 2013.

In this way, the UK’s stance on swipe charges is moving closer to that of the US, where both Visa and MasterCard have banned such surcharges as a condition of accepting their cards, although this approach is also under review as smaller merchants have complained that typical fees of 1.5%-3% are crippling them.

The airline industry in particular has been heavily criticized for not including the charges in headline prices and research conducted by UK consumer group Which? revealed that such surcharges amounted to £300 million ($481.2 million) in that industry alone in 2010. Furthermore, in July this year, 12 airlines were told that they must include the charges in their headline ticket prices, instead of adding them at the end of the booking process. The airlines involved were Aer Lingus, BMI Baby, Eastern Airways, Easyjet, Flybe, German Wings, Jet2, Lufthansa, Ryanair, Thomas Cook, Thomson (TUI) and Wizz Air.

As the popularity of card payments grows, it is becoming increasingly important to accept this method of payment. However, consumers are now tiring of ‘paying to pay’ and the days of profiting from card payments appear to be drawing to a close, in the UK at least.

Visa Inc. and MasterCard Incorporated are the world’s two biggest card issuers. For a detailed understanding of their operations, see our company profiles

Leave a comment

*Required fields. We will not publish your email address