Despite the EU’s official determination to reduce “inefficient cash payments” across Europe, EU rules allow extra charges to be applied to card payments, indirectly supporting the use of cash.
As online booking becomes increasingly widespread, so does the payment of extra fees for the use of credit or debit cards.
But in some cases, the surcharge is applied not on transactions but on items or tickets purchased. The low-cost Irish airline Ryanair is a frontrunner in this regard, even applying a per-ticket surcharge. This means that if a consumer buys three tickets, then he or she will pay a surcharge three times for using the card, even if the purchase was carried out in a single transaction.
The card payment surcharging model is also applied to offline payments. For example, in countries where the legislation allows such practices, furniture retailer Ikea charges clients an extra fee for using payment cards.
Apart from the harm to consumers, the practice has anti-competitive consequences for payment card companies. In the case of Ryanair, the company allows free-of-charge payments if the customer uses a Visa Electron card thanks to an agreement with the card company. This means payments to the company via Visa Electron amounted to over 25% of the total in 2007 and 2008, according to a Ryanair spokesperson.
In the case of Ikea, the Swedish company applies no fees to payments carried out with cash or with its own credit card, while it charges other cards’ clients with an extra fee in those countries where it is allowed to do so.
Among those countries are the UK, Ireland, Germany and Spain, which exploit a loophole in the Payment Services Directive, the new legislation on electronic payments adopted at EU level in November 2007. The directive is in fact vague on surcharging, allowing states to decide whether to ban or allow it.
Brussels pushed for the introduction of a common EU policy on surcharging, but opposition from member states was strong and eventually prevailed. The result is somewhat paradoxical if one takes into account that one of the PSD’s main objectives was to decrease “inefficient” cash payments.