The Office of Fair Trading today accused credit card firm Visa and its affiliate banks of overcharging retailers for credit and debit card transactions.

The competition watchdog said the so-called intercharge fees were "unduly high" and led to higher prices in the shops.

The fees in question are charged as a percentage of the transaction and paid to the bank that issued the card.

The OFT made the accusation in a formal statement of objections that puts Visa on notice that it has breached competition law.

Visa and its banking partners now have the chance to respond before the OFT makes its final verdict.

Last month the OFT concluded an investigation into the fees cahrged by Visa’s rival Mastercard. The regulator said that between March 2000 and November 2004 Maastercard and its member’s forum breached competition law by setting their fees too high in order to recoup the costs associated with interest-free credit card deals.

Colin Grannell, the managing director of Visa UK, said of today’s development: "We have been expecting this so we are not surprised by it, although we are disappointed with some of the words used. We do not agree that the rates are unduly high."

He said Visa had agreed a way of calculating its interchange fee with the European Commission and it used the same calculation in the UK.

He added: "We haven’t seen the details yet, so we will get that and think through that and then we will undertake more discussions with the OFT

The rate at which Visa’s UK interchange fee is set is not in the public domain, but the fee it charges in Europe is 0.7 per cent, compared with 0.95 per cent for MasterCard, although different fees are charged for different types of transaction.

At the end of June this year there were 42.8 million Visa credit cards in issue in the UK, with transactions during the year totalling £87.2 billion.