Credit cards: Government to ban 'rip-off' charges. But is it really a win for consumers?

Even a Government made up of terrible people with (mostly) terrible ideas is entitled to the occasional good one.

The decision to ban top-up fees imposed on card-based transactions would seem to be one of them.

There are few things that irritate consumers more than having to cough up extra to use what has become the majority method by which they pay for things.

Ryanair, for example, became infamous for its card surcharges, which its passengers could (at one point) avoid only by using relatively unusual types of card which often seemed to change. Visa Electron, for example. Cash wasn’t really an option.

It was part of the firm’s marketing strategy to enable it to advertise flights at rock bottom prices and then claw back revenues through other means.

If Ryanair were an outlier it wouldn’t matter: You don’t have to fly with the airline.

However, it is not. The charges can be found levied by any number of businesses.

But will banning them actually save consumers any money? That’s open to debate. Firms that levy the charges might simply to choose to add them to the overall cost of their products or services, if they can get away with doing so.

That will simply serve to penalise those who use cash (or Visa Electron?), who don’t pay the charges now.

So the end to “rip-off” charges isn’t quite as good as it might look.

Secondly it doesn’t really address the wider problem of why the charges appear in the first place.

The growing popularity of card-based transactions, and of internet based trading, has encouraged the growth of a vast new industry.

As I recently wrote, it is dominated by huge companies that have pricing power.

Don’t want to accept, say, PayPal or ApplePay or whatever? Fine. You don’t have to. But you might be crippling your business if you don’t. So many simply suck it up, passing on the fees they are charged as best they can.

Back to interchange fees: They were actually capped through an EU ruling. That’s right. A good EU ruling that served to benefit both consumers and retailers. There are more of those than most people think and we’re about to lose them.

The British Retail Consortium put the savings to British business from the move at £480m.

The Government says it will ask retailers what it can do to help in the wake of the decision to end top-up fees. It could start by considering whether it isn’t time to lower the cap. Card based payments are, after all, growing apace, generating more revenues from interchange fees as a result.

There are also a number of issues raised by the EU cap, one of which was recently raised by the National Franchised Dealers Association. It noted that the removal of a maximum charge imposed on retailers for debit card payments has ended up imposing significant extra costs on those selling high value items, like its members.

The EU is not due to asses the impact of its measure until 2019. Our Government might like to think about starting work on something similar rather earlier, perhaps as part of a wider consideration of impact on the economy of the rent that is being levied by the payments industry generally.