Shoppers and businesses could see the cost of credit and debit card transactions fall, after a law capping fees was passed today.

Every time a consumer makes a payment using a debit or credit card, the retailer is charged a small fee. This cost is generally added to the prices of goods and services by businesses and ultimately borne by consumers.

Card transaction fees cost businesses around the EU around ten billion euros, according to the European Parliament.

Small savings: The cost of credit and debit card transactions is set to fall, saving retailers money that they could pass on to shoppers

Politicians have criticised the fees claiming they are opaque and differ from country to country.

But today the European Parliament voted in favour of a bill to cap the fees at 0.3 per cent of the value of transactions on credit cards and 0.2 per cent for debit card payments across borders.

The cap will apply to all card payments made in the UK and to retailers throughout Europe.

Debit card payments within the UK will be capped at 0.2 per cent of the average transaction value of all payments within any card scheme, such as Visa or Mastercard.

The bill was passed with 621 votes for, 26 against, and 29 abstentions, and the law is expected to take effect in October.

It followed an agreement reached among EU governments in favour of the cap in December.

It could amount to a considerable saving for UK retailers and consumers, where there are 95.7million debit cards in circulation and 61.7million credit cards.

CMS Payments Intelligence, which campaigns against the fees on behalf of store groups, has estimated in the past that transaction costs can be as high as 0.8 per cent - a significant outlay when margins are tight.

Liberal Democrat MEP Catherine Bearder said: 'For too long, banks have got away with charging retailers excessive card fees and it is consumers who end up paying the price.

'This move will make card fees cheaper, fairer and more transparent for shoppers, whether buying at home or abroad in the EU.

'It will also lower the cost of internet payments and help to create a level playing field for online shopping across Europe.'

The new rules will affect all payments involving Visa and Mastercard, which account for the lion's share of the market.

Visa has said clarity on the fees was welcome, but warned it could hurt the cards industry and said there was no guarantee that retailers would pass savings on to consumers.

The price cap will not apply to so-called three-party card schemes, such as Diners and American Express, which involve only one bank. Commercial cards used only for business expenses will also be exempt from the new price cap.

Price cap: The new rules will apply to Visa and Mastercard payments, but not Diners or American Express

Retailers will also be free to choose which cards to accept, effectively ending the so-called 'Honour All Cards' rule.

Visa has said that could be bad for consumers if they are unsure if their card will be accepted.

Regulators in individual EU countries are also investigating the cards industry.

In Britain, where 70 per cent of Europe's credit cards are held, the financial watchdog is assessing the way cards are sold amid concerns that poorer customers are trapped in a spiral of debt on their cards.

Commentators questioned whether the savings would be passed on to consumers, or if banking fees would rise to offset the cap.

David Mann, money spokesman at comparison website uSwitch.com, said: 'A cap on card fees should be great news for credit card users - if savings are passed on and retailers start to offer a greater choice of payment options.

'But we haven't seen such savings passed on in other countries that have introduced similar caps. Prices have remained the same and retailers have padded their bottom line with these savings. We can only hope that this time things will be different given the current squeeze on people's pockets.'