Published: 30/01/2018

What does the Card Surcharge Ban mean for small businesses?

On Saturday the 13th January 2018, the UK government made it illegal for businesses to add a surcharge to customers paying using their credit or debit card. This is great news for consumers no longer having to pay extra to use their card, but what does this mean for the UK’s small businesses? Let’s take a look…

What are surcharges?

As a business, you most likely already know what a surcharge is, but let’s go over the basics. A surcharge is an additional fee that’s added by businesses for any customer who chooses to pay for your products and services via credit or debit card. This is normally done to cover the costs that businesses need to process the debit or credit card payment.

So, what exactly has changed?

Before the ban was put in place, UK businesses could charge their customers extra when they paid using their debit or credit card. This meant that they could charge customers what it costs the business to process the debit or credit card payment. As of the 13th January 2018, businesses can now no longer charge their customers for choosing to pay by card, whether that’s online or inside your store. It also applies if the customer wants to pay using PayPal or Apple Pay.

Who has this impacted?

The main businesses who have been impacted are travel airlines, take-away food apps, ticket booking sites and other small high street businesses. Some of this also includes local council services, HMRC plus the DVLA who used to charge customers a £2.50 fee on credit cards. Although these examples are larger companies, if you’re a small business who is concerned with the new ban, there’s a few things you can do…

What to do if you're concerned?

If you are concerned that the ban will impact, now is the time to ensure that you are getting everything you need from your current card payments provider. You should check that you understand any fees or charges you’re paying your supplier and what exactly they are for such as terminal rental, any admin fees, etc. We’ve already pulled together a checklist on what you should be asking when you’re thinking of accepting card payments with any card payments supplier.

Don't get left behind the times

Even with the card surcharge ban, card payments are still on the rise. Despite the ban being announced in Summer 2017, card payments are becoming an increasingly popular way to pay, with it being reported that same year that card payments overtook cash payments for the first time in the UK. According to recent studies by the UK Cards Association, in the 1stquarter of 2017, there were 153 million more card purchases made than in the 4th quarter of 2016. It was also reported that credit card transactions amounted to £49.8 billion plus card spending accounted for 78.4% of national retail sales by the end of the quarter.

Accepting credit and debit cards aren’t the only payments you should be thinking about. Contactless payments have also seen an increase, with contactless amounting to 32% of total card payments in the 1st quarter of 2017.

Card payments are changing, don't stick with the status quo

In a recent article in Better Retailing, one of our merchants said "I was worried about the card charge ban, but by phoning around and negotiating with providers, I've managed to cut my card payment bills from £400 to £150. Retailers need to know what's out there."

We spoke to our Chief Commercial Officer Rupert Lowery who had these thoughts on the matter, "The average transaction fee was maybe 10-15p per transaction and now that should have now reduced. In the convenience sector, it's not untypical for a debit card to be between 0.4 and 0.6% and a credit card to be between 0.6 and 0.9%, it all depends on retailer size, turnover, risk and location but retailers can save a lot of money by choosing a card acceptance provider such as Payzone that offer short contracts with bespoke pricing and not settling for a pre-packaged contract."

At Payzone, we’re dedicated to supporting small to medium-sized businesses grow across the UK with their payment solutions. We work with thousands of small businesses across the country, providing them safe and secure card payment solutions, whether that’s face-to-face using a card machine, online or over the phone. Find out more about us and how we support small businesses like yours today.

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