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Which? launches super complaint about credit card surcharges

Do you bother to check your credit card bills for hidden charges that have been lumped on after you've paid for goods and without your knowledge?

The Consumer watchdog Which? is launching a super complaint. It's angry about the surcharges customers are hit with when they pay for goods and services using plastic from most retailers, travel companies even local authorities. Which? wants them all to be more upfront about the fees and match them more closely to what the transactions actually cost them. The retailers insist that the charges do not match the so called interchange fee they have to pay the debit and credit card companies for each transaction. Hitting back at the accusations, Ryanair says that it does not levy any credit or debit card payment surcharges. So who's telling the truth?

Sandra Quinn from the UK Cards Assocation which represents most card companies are supporting Which?.

In an interview with BBC Radio 5 Wake Up To Money programme Sandra Quinn commented "It's very unusual for us to team up on the good guys' side, but we're really keen to do this because what we're seeing from retailers, predominantly travel companies, is that they're surcharging customers and they're saying that reflects the card processing cost - what they pay to their bank. Now obviously they do pay a charge to the bank because they're getting a service, but they're not paying anywhere near the 5% or 3.5% or whatever they're charging you and I.

We certainly know that one of the reasons that surcharging first arose was back in the early 1990s when law was put in place to allow surcharging legally on credit cards. It essentially meant that at that time when actually we were in a recession, people were getting discounts for cash so if you were paying by credit card, retailers were saying well we want to be able to surcharge. Now if you're charging say 2%, and that's traditionally what travel companies were charging - about 2%, most of us were very happy to put an extra 2% on the price of our holiday cottage."

Sandra Quinn was asked whether the charge was an interchange fee, what the retailer charges the customer for using the card?

In response she said "what the retailer is paying is what's called a merchant service charge. They're paying their card company a cost for a debit card and that's a matter of pence per debit card, a flat fee per pence.

So the retailer is making a profit on those deals?

Sandra Quinn replies by saying "Absolutely no doubt about that and on a credit card they're paying a percentage because obviously they're getting credit so they're paying a percentage of that fee. So the more the goods you're buying costs, the more credit that shop's getting because they're getting their money well before you and I as customers are ever paying our credit card bill. We're not talking about a service that retailers aren't getting here, they're paying a fee for a service. We all pay fees for services we buy and so retailers are doing likewise. Now they negotiate those fees direct with their card company, so they're paying a fee and us as cardholders we often pay fees - we pay APRs, so if we're not paying off our bill every month we do pay a charge for that, but the key thing here is that retailers are paying a fair rate. It's a very competitive market out there, if you don't like what you're paying, find another supplier."

What are the legalities here with this? Do they have to say up front this is what the fee is going to be or are they entitled just to lump something on quietly?

Sandra Quinn replies by saying "I think the key is as a customer you'll be paying that charge in the one lump sum that you pay to whatever retailer you're buying from, so if we're talking about a travel company - because it tends to happen much more in the travel industry - because there's no end of retailers out there who accept cards and there's quite a few who never surcharge at all, so let's be fair to retailers, they're not all doing this."

Sandra Quinn believes travel companies are the worst offenders and says "we've got some law which dates back to 1990 which allows surcharging which allows companies to recoup the costs of processing that card transaction. Whether you're banking cash, cheques or credit card transactions you're paying for that service because you're a business and you're getting a service from your bank, you'd expect to do that. What's happened is a burgeoning in online transactions and I think there's two things that as customers we've really noticed surcharging - travel companies and online where we're paying for admin on transactions where we're buying tickets for cinema, trains and car parking - whatever we're booking. Now that's just seems counterintuitive; you're paying for the goods, why are you paying for paying for them?"

When asked specifically about Ryan Air Sandra Quinn commented "Well I'm not completely au fait with Ryanair's charging, but most low cost airlines charge a fee of anything up to 5 per credit card transaction and anything up to 1-2 per debit card transaction. That sounds like a surcharge to me."

Which? have powers to put a complaint through to the Office of Fair Trading and they must carry out an investigation and look at where these costs are and they can regulate in this area.