Retailers will no longer be allowed to charge customers extra for paying by debit or credit card as of next year.
From January 2018, all businesses will be banned from adding a surcharge to card payments.
The move by the Government follows a directive from the EU to end surcharges on Visa and Mastercard transactions. The UK has gone one step further, adding American Express cards and Paypal to the list.
Surcharging is a common practice on many purchases, ranging from flights to take-aways.
Currently, consumers using credit cards to buy airline tickets with Flybe are subject to a 3% fee, while Ryanair and Norwegian customers pay 2%.
What the banks charge
On average, banks charge large retailers between 10p and 20p for each debit card transaction, or 0.6% for credit cards.
In 2010, the total value of surcharges for debit and credit cards was an estimated £473m, according to the Treasury.
The change in the law is likely to mean some companies will put up prices to cover the costs.