Why do some companies charge for using a credit card?

Chris Torney / 29 January 2016

If you pay for goods or services with a credit card rather than a debit card, you might find that retailers will add an extra charge on to your bill. So why do they do this – and is it fair?

Why are extra fees imposed?

Whenever a company makes a sale that has been paid for by a debit or credit card, it faces certain charges from its bank relating to processing the payment. 

Most of the time, the retailer doesn’t explicitly add these charges – they are just taken into account when it sets its prices.

But some firms, such as airlines or online travel companies, have a policy of adding card fees to the cost of bookings. This is especially the case when it comes to credit cards, as the transaction costs are usually higher.

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How much could I be charged?

Some companies impose a fixed credit-card fee and for others, it is a percentage of the total bill. 

Airline Ryanair, for example, charges 2% of the transaction for paying by credit card, so on flights costing £200 this would be £4. Paying by debit card means there’s no extra charge on Ryanair.

EasyJet customers, on the other hand, face a £13 “administration” charge regardless of how they pay, while credit card payments have a 2% fee added on top.

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How has the law changed?

New EU rules came into force in December 2015 limiting the charges that banks can impose on retailers for dealing with card payments. This may help to reduce the extra fees faced by consumers, but there is no guarantee that any lower costs will be passed on.

UK consumer watchdogs say that as long as retailers make any extra charges clear to customers before they buy, they can impose more or less whatever admin fees they like.

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Why paying by credit card could still be best

Although you may face higher fees, paying by credit card can have one important extra benefit. Purchases worth between £100 and £30,000 made by credit card are protected under legislation known as Section 75 of the Consumer Credit Act

This means that if you have any problems – for example the goods you order are damaged or of poor quality, or your flights are cancelled – you can claim a refund not just from the retailer but alternatively from your credit-card provider.

This can be particularly useful in cases where the retailer refuses to settle a dispute in a satisfactory manner or where it goes out of business before delivering your goods.

For more tips and useful information, browse our money articles.

The opinions expressed are those of the author and are not held by Saga unless specifically stated.

The material is for general information only and does not constitute investment, tax, legal, medical or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.