Credit card surcharges being outlawed in Europe

People don’t like surcharges. Consumers don’t like having to pay extra for something because they used a different medium of payment and merchants don’t like charging extra due to the fear of driving potential customers away. Those days may be changing.

The European Parliament has decided to outlaw surcharges starting in January of 2018. Several member states of the European Union (France, Germany, Italy and Portugal as well as the United Kingdom) outlawed surcharges before this took effect and the move has been welcomed by other member states.

Like in the United States, surcharges in Europe are used to cover at least some of the cost of credit card processing. The charges can add up over time and can also lead to surprises when a consumer goes to check out. The EU had previously capped processing fees in order to help both merchants and consumers so this was the next logical step.

Of course not everyone is happy. Consumers will undoubtedly have to foot the bill for the remaining processing costs if the merchant does not absorb them and many travel companies are already upping prices to cover these costs. The costs of other goods will also most certainly go up to cover the lost surcharges, which amounted to £473 million in the UK (about $670 million) alone in 2016. With the increased price of goods it is argued that will negate the surcharge removal and in the end no one will benefit as consumer spending decreases.

For now most merchants are thrilled and it is believed that most consumers will be as well. Time will tell but for now there is little momentum for doing the same thing in the United States. Considering that we operate about five years behind Europe that should be no surprise. This will be interesting to revisit around 2023 to see not only how well the policy worked but also to see if the United States is adopting it.