RBA looks at more affordable electronic payments

RBA looks at more affordable electronic payments

Despite changes to interchange fee regulations earlier this year, small businesses and Australian consumers are still paying more for the convenience of electronic payments, according to the Reserve Bank of Australia (RBA), indicating that some acquiring banks are yet to pass on their savings on interchange costs.

Speaking at the 2017 Australian Payment Summit, RBA head of payments policy, Tony Richards, went over some of the data around the cost of electronic payments to merchants, and its impact on everyday Australians.

Electronic payments costing more for small business

Looking at data gathered over the 2016/17 financial year (prior to the interchange fee changes), it was found that eftpos payments were the least expensive electronic payment option for merchants, followed by MasterCard and Visa debit, MasterCard and Visa credit, and Unionpay, due to the difference in interchange fees for these systems.

However, even eftpos was found to be expensive for some merchants to provide, such as coffee shops where the value of each individual transaction tends to be lower.

This was reflective of a wider trend where smaller merchants were experiencing higher average payment costs than larger merchants, for reasons including: 

  • Merchants with smaller transaction volumes may struggle to manage the fixed costs associated with providing payment services.
  • Smaller merchants may have less bargaining power with acquirers.
  • Smaller merchants are less likely to benefit from strategic or preferred interchange rates from card schemes.
  • Smaller merchants may be less financially sophisticated and may not always choose, or be offered, plans from their acquiring banks that would minimise their payment costs.

While not as much data was available in the post-interchange fee period, it was found that there has been some narrowing in the cost to merchants of eftpos and Visa/MasterCard debit schemes. However, a significant difference remains between the two, indicating that savings on interchange costs due to the new regulations may not yet be being passed through by acquirer banks.

Tap & go – the cost of convenience

One factor potentially contributing to the higher payment costs being copped by smaller businesses is the current arrangement of tap and go payment systems.

Many of these contactless payment terminals are currently set up to automatically route payments through the international MasterCard or Visa networks, rather than the local eftpos network, even for non-credit transactions.

And due to the convenience of tap and go payments, the popularity of these systems can push up their potential cost to small business. 

The higher merchant costs associated with these transactions can result in Australian shoppers being charged higher prices, or having to pay surcharges or minimum transaction values when making electronic payments.  

Least-cost payments

Many merchants have begun calling for least-cost payments, where electronic payment terminals are set up to automatically route digital payments through whatever channels will charge the fewest fees to the merchants .

According to Mr Richards, the RBA has been in discussions with consumer organisations and the Australian Competition and Consumer Commission (ACCC) around implementing least cost routing, in the interest of providing fairness to Australian small businesses and shoppers.

Recent meetings of the Payment Systems Board have recommended that banks be required to give merchants the ability to send tap-and-go payments from dual-network debit cards through the channel of their choice, with regulation to this effect to occur if the banks have not facilitated this recommendation by 1 April 2018.

Did you find this helpful? Why not share this news?

Advertisement

RateCity
ratecity-newsletter

Money Health Newsletter

Subscribe for news, tips and expert opinions to help you make smarter financial decisions

By submitting this form, you agree to the RateCity Privacy Policy, Terms of Use and Disclaimer.

Advertisement

Learn more about credit cards

How to pay a credit card

There are a few ways to pay a credit card bill. These include:

  • BPAY - allows you to safely make credit card payments online.
  • Direct debits - set up an automatic payment from your bank account to pay your credit card bill each month. You can choose how much you want to pay of your credit card bill when you set up the auto payments.
  • In a branch.
  • Via your credit card provider's app.

How to get a free credit card

There's no such thing as a free lunch. All credit cards come with associated costs when used to make purchases, even if it’s simply the cost of making repayments.

However, many lenders offer incentives for customers such as a $0 annual fee or 0 per cent interest on purchases during an introductory period. Additionally, paying off your balance in full during an interest-free period means you could only have to pay back the cost of purchases without interest. You could also be eligible for additional rewards such as cashback during that time, saving you more money.

What can I do about my Commonwealth Bank expired credit card?

You’ll typically receive your replacement Commonwealth Bank credit card before your current one expires. 

Once you receive the replacement card, you may need to update the new card with all the direct debits that you had set up on your expired Commonwealth Bank credit card. These could include insurance payments, electricity or gas bills, and monthly entertainment subscriptions.

To see a list of all your regular payments in NetBank, follow these steps:

  1. Log on to NetBank
  2. Click on ‘settings’
  3. Go to ‘product requests’, and select ‘credit card regular payments’. 

If you don’t use NetBank, you can see the list of your regular payments on your most recent credit card statement. Keep in mind, this list may not be complete and you should also check your past statements or your transaction history. 

If you haven’t received your replacement card before your current card expires, call 13 22 21 and the bank will send a new card to you. 

It is important that you safely discard your expired credit card. This often means cutting it up with scissors and throwing it out. 

Can we pay stamp duty by credit card?

Different states also have different rules about whether you can pay stamp duty with a credit card. Check the payment options for stamp duty on your local state revenue office website.

Some allow payments only from a savings or chequing account, whereas others allow payment through BPAY using your credit card. Also read the fine print to see if BPAY payments on your credit card are considered cash advances, as this could attract a higher interest rate.

How to get money from a credit card

You can get money from a credit card, but generally it will cost you.

Withdrawing money from a credit card is called a cash advance, as it operates more as a loan than a simple cash withdrawal. Because it is a loan, you may be charged interest on your cash advance as soon as you make the withdrawal. Interest rates are also usually much higher for cash advances than standard credit card purchases.

In addition to the interest rate, you may also be charged a cash advance fee. This could be a flat rate, or a percentage of your total cash advance. If you are considering a cash advance, make sure to add up how much it will cost you before committing.

How to get cash with just a credit card number

Banks and merchants usually will not allow you to access cash without a physical card, because doing so would open up opportunities for fraudulent activities. Even most non-cash credit card transactions (such as shopping online) require you to know the expiry date and CVV on your credit card in addition to the card number.

However, some banks offer cardless cash for transaction accounts. Using a secure app installed on your mobile phone, you can log onto an ATM and withdraw the money you need. This could be a practical and secure solution if you don’t have a card and need cash.

What is a credit card?

A credit card is a payment method which lets you pay for goods and services without using your own money. It’s essentially a short-term loan which lets you borrow the bank’s money to pay for things which you can pay back – potentially with interest – at a later date. Credit cards can also be used to withdraw money from an ATM, which is known as a cash advance. Because you’re borrowing money from a bank, credit cards charge you interest on the money you use (unless you repay the entire debt during the interest-free period). When you apply for a credit card, the bank gives you a credit limit which sets the maximum amount you can borrow using your card. Credit cards are one of the most popular methods of payments and can be a convenient way of paying for goods and services in store, online and all around the globe.

How do I transfer money from my Commonwealth bank credit card to my bank account?

Your Commonwealth bank credit card may include a cash advance benefit, but you won't be able to transfer money to your bank account. 

You can, however, withdraw cash from your credit card at an ATM. You should remember that you have to pay a fee for such transactions, and you’ll be charged interest from the day you withdraw the cash. 

Unlike other credit card transactions, you don’t get an interest-free repayment period for cash advances. Also, you may not be able to access your full credit card limit for a cash advance.

How do you apply for a credit card?

You can apply for a credit card online, over the phone or in person at the bank. Once you’ve compared the current credit card offers, the application process is quick and easy. Before you get your application started, you’ll need to gather your personal information like proof of ID, payslips and bank statements, proof of employment and details of your income, assets and liabilities. To be eligible for a credit card, you’ll need to be an Australian citizen over 18 and earn a minimum of $15,000 each year. Once you’ve applied for a credit card, you should get a response fairly instantly. If your credit card application has been approved, you should receive a welcome pack with your new credit card within 10-15 days.

Are there credit cards for students?

Yes, there are credit cards available with students in mind. These can help young Australians to build their credit report and learn crucial life skills around budgeting and managing personal finances.

How do credit cards work?

Think of credit cards as a short-term loan where you use the bank’s money to buy something up front and then pay for it later. Unlike a debit card which uses your own money to pay, a credit card essentially borrows the bank’s money to fund the purchase. When you apply for a credit card, the bank assesses your income and assigns you a credit limit based on what you can afford to pay back. At the end of each billing cycle, which is usually monthly, the bank will send you a statement showing the minimum amount you have to pay back, including any interest payable on the balance.

How do you use credit cards?

A credit card can be an easy way to make purchases online, in person or over the phone. When used properly, a credit card can even help you manage your cash flow. But before applying for a credit card, it’s good to know how they work. A credit card is essentially a personal line of credit which lets you buy things and pay for them later. As a card holder, you’ll be given a credit limit and (potentially) charged interest on the money the bank lends you. At the end of each billing period, the bank will send you a statement which shows your outstanding balance and the minimum amount you need to pay back. If you don’t pay back the full balance amount, the bank will begin charging you interest.

What is the lowest monthly repayment on my credit card?

As a rule of thumb, this tends to be around 2-3 per cent of the outstanding balance. You can choose how much you want to repay each billing period as long as it is higher than this minimum required amount.

How long does it take to get a credit card?

There are a few stages you need to go through to get a credit card; each one takes a different length of time.

Applying for the card online, over the phone or in person is the fastest step. This usually takes around 15 minutes, provided you have all of your documents handy.

After submitting your application, it usually takes between one to 10 business days for the lender to assess your eligibility. Some lenders offer instant approval, although you will need to send supporting documents before it is official.

Once your application has been approved, expect to wait between one to 14 days to receive your card in the mail. Keep in mind that delays can happen during busy periods, such as if the lender has launched a special deal.