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Good news or bad news? Government bans credit card acceptance fees from January

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In a surprise announcement, the Government has decided to ban credit card acceptance fees from 13th January 2018.  This is the next move after the EU cap on interchange fees – if retailers are meant to be paying no more than 0.3% to accept standard Visa and Mastercard products, the Government must think that they can afford to absorb the fee altogether.

From the viewpoint of HfP readers, this will mean the end of credit card fees when booking flights.  (Of course, the BA fee has always been voluntary for those in the know …..)

More importantly, though, you may be excited by the additional possibilities for running up credit card spend to earn more miles and points.

After all, no-one will be charging after 13th January so surely life will be better?

Real life isn’t that simple, of course.

As retailers who read HfP always point out in our comments section, fees for shops have not come down to 0.3% for anyone not called Tesco.   This is because charges to retailers include the rental of payment terminals and various other services which lead to a far higher overall fee.

On the other hand, as a reader pointed out yesterday, he is charged 0.6% by his bank for depositing CASH.  Given that it also needs staff time to count and sort it, he would be happier if all his customers used cards.

This ban will disproportionately impact the acceptance of American Express, since Gold and Platinum cards are not impacted by the interchange fee cap.  Stores will also be hit hard if they accept business, ‘premium’ (eg World Elite) or foreign Visa and Mastercard products.

Whether this decision turns out to be a ‘win’ for American Express, or card acceptance in general, remains to be seen.

Don’t get carried away by the potential for HMRC acceptance

I had a few emails yesterday from readers who were delighted that they would be able to pay their income tax, PAYE, VAT etc for free with their credit card from next January.

These people are living in fairy land.

At the moment, HMRC charges you – almost exactly – the interchange fees levied by Visa or Mastercard.  These are:

VISA Personal Credit Card 0.415%
Mastercard Personal Credit Card 0.386%
Mastercard World Premium Credit Card 0.374%
Mastercard Signia Premium Credit Card 0.606%
Mastercard Elite Premium Credit Card 0.606%

VISA Business Credit Card 1.508%
VISA Corporate Credit Card 1.744%
VISA Purchasing Credit Card 1.755%
Mastercard Business Credit Card 1.973%
Mastercard Corporate Credit Card 2.248%
Mastercard Purchasing Credit Card 2.406%
Mastercard Fleet Credit Card 2.134%

Anyone who thinks that HMRC is going to absorb a credit card charge of as much as 2.406% is dreaming.  It is more likely that the Revenue stops accepting credit cards.

Even at 0.386% it would be a noticeable hit to tax revenue if every small business, sole trader or individual with additional non-PAYE income started to use a card.

The only reason it may continue is that …. well …. it’s the Government we’re talking about here.

Speaking personally, though, I think I will be paying my January 2018 tax bill BEFORE 13th January (for a 0.38% credit card fee) rather than gambling that the facility will still be available after that.

Want to earn more points from credit cards? – August 2022 update

If you are looking to apply for a new credit card, here are our top recommendations based on the current sign-up bonuses.

In February 2022, Barclaycard launched two exciting new Barclaycard Avios Mastercard cards with a bonus of up to 25,000 Avios. You can apply here.

You qualify for the bonus on these cards even if you have a British Airways American Express card:

Barclaycard Avios Plus card

Barclaycard Avios Plus Mastercard

25,000 Avios for signing up and an upgrade voucher for spending £10,000 Read our full review

Barclaycard Avios card

Barclaycard Avios Mastercard

5,000 Avios for signing up and an upgrade voucher for spending £20,000 Read our full review

You can see our full directory of all UK cards which earn airline or hotel points here. Here are the best of the other deals currently available.

EDIT: Until 25th October 2022, there is an exceptionally generous sign-up bonus on The Platinum Card. You will receive 60,000 Membership Rewards points – double the usual amount – and £200 to spend at Amex Travel. You need to spend £6,000 within six months to earn the bonus.

British Airways BA Premium Plus American Express Amex credit card

British Airways American Express Premium Plus

25,000 Avios and the UK’s most valuable card perk – the 2-4-1 voucher Read our full review

American Express Amex Gold

American Express Preferred Rewards Gold

Your best beginner’s card – 20,000 points, FREE for a year & two airport lounge passes Read our full review

American Express Platinum card Amex

The Platinum Card from American Express

60,000 points, £200 travel credit and an unbeatable set of travel benefits – for a fee Read our full review

Virgin Rewards Plus credit card

Virgin Atlantic Reward+ Mastercard

15,000 points bonus and 1.5 points for every £1 you spend Read our full review

Earning miles and points from small business cards

If you are a sole trader or run a small company, you may also want to check out these offers:

Amex Platinum Business American Express

American Express Business Platinum

40,000 points sign-up bonus and a long list of travel benefits Read our full review

American Express Business Gold

20,000 points sign-up bonus and free for a year Read our full review

British Airways Accelerating Business American Express card

British Airways Accelerating Business American Express

30,000 Avios sign-up bonus – plus annual bonuses of up to 30,000 Avios Read our full review

Capital On Tap Business Rewards Visa

10,500 points bonus – the most generous Avios Visa for a limited company Read our full review

For a non-American Express option, we also recommend the Barclaycard Select Cashback card for sole traders and small businesses. It is FREE and you receive 1% cashback on your spending.

Barclaycard Select Cashback credit card

1% cashback (3% on business travel for four months) and no annual fee Read our full review

Comments (120)

This article is closed to new comments. Feel free to ask your question in the HfP forums.

  • Neal says:

    OT but if anyone interested the new Victory House Hotel MGallery by Sofitel in London Leicester Square has a special opening rate for Gold and Platinum Le Club members of £98 per night from 10 Aug to 31 Aug.

    • Rob says:

      …… for a room the size of my bathroom. Looked at it, rejected. Far better value in London even at £99 for a room where you can lie in bed and touch both walls ….

  • Jean Paul says:

    Is there any card currently accepting new customers that beats the Tesco bank debit card for paying HMRC? Tesco bank debit card pays 0.3 avios per £1 and there’s no fee to use.

    I know some legacy products offer far superior rewards, even after the fee. But is there anything much better than the tesco card that is open to newbies?

    • Rob says:

      Depends how you play the maths. Virgin Black is 1 per £1, fat fee but arguably sign up bonus negates it in year 1.

      It is tricky to beat and could be a HMRC fall back if they drop credit cards.

      • Will says:

        If you use the Tesco debit card to pay off a credit card bill, does that trigger 0.3/£ or is it non qualifying spend ?

        • Alan says:

          Counts as finance transaction with no earnings in my experience (tried it with Amex and Hilton Visa)

    • Alex W says:

      IHG Premium is better. 0.374% fee and 2 points per £. Which based on yesterday’s discussion are worth AT LEAST 0.88p compared to buying them and worth about 1.1p when redeeming them. So I make that at least a 0.506% return.
      That’s not including the free night at £10k spend. Worth around £250, minus £99 fee = about another 1.5% back on your spend. So total 2% return using IHG premium to pay HMRC.

  • RIcatti says:

    This behaviour of British Gas as THE LENDER is questionable.

    In addition to the extortionary £40 fee, they are probably leaving Late Payment mark on your credit file. The consequences are serious.

    I would switch from such provider IMMEDIATELY.

  • Henry says:

    Linking your amex to your paypal account and then paying via paypal gets rid of credit card fees on some websites. (This works on for example)

  • Lewis Watson says:

    Just wonder will it affect Amex as they are not credit cards?

    • guesswho2000 says:

      Yes it will, it’ll apply to all card payments, and some (maybe most?) Amex’s are credit cards, it’s only the Green/Gold/Platinum/Centurion charge cards which aren’t.

      In the same way that it’s possible to get Visa’s which aren’t credit cards (cba to look and confirm, but I think Handelsbanken issues a Visa charge card in the UK, or at least did at some point, and Barclaycard a business charge card).

This article is closed to new comments. Feel free to ask your question in the HfP forums.

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