Turnbull moves to stamp out excessive card surcharges

Turnbull moves to stamp out excessive card surcharges

The Federal Government will introduce a ban on excessive card surcharges, to be phased in from mid next year, to stop customers getting unfairly ripped off when they pull out their plastic.

The proposed ban is one of the key outcomes in the government’s response to the Financial Systems Inquiry, released today.

The Reserve Bank will be tasked with defining what constitutes excessive customer surcharges on card payments and the Australian Competition and Consumer Commission (ACCC) will be given the power and responsibility for enforcing the ban.

RateCity’s chief executive officer, Paul Marshall warns that the ban will only be effective if it can be enforced.

“This new ban has to be practical, otherwise customers will continue to be price gouged,” says Marshall.  “Changes introduced two years ago failed because the system was difficult to regulate and enforce.

In 2013 the RBA tightened the regulations around card surcharges in an effort to ensure that ‘reasonable’ costs are passed on, rather than inflated charges. But two years on and the issue continues to attract consumer concern. Over 5000 submissions were made to the government’s financial systems inquiry in relation to card surcharges – over 75 per cent of the total number submissions.

“Card surcharges have clearly got consumers’ blood boiling, and for good reason,” says Marshall.  “While not every merchant is adding a little cream to the surcharge payments, a number of high-profile examples have attracted national attention and consumers are understandably angry,” he says.

About card surcharges

Credit card surcharges are additional fees paid for by the customer when using a credit card. These fees are designed to cover costs a merchant incurs when processing credit card transactions.

Currently, businesses set their own credit card surcharges however they are required to tell customers that they exist and how much they will be.

Some businesses choose to absorb the cost or collect these fees through higher prices, while others add a surcharge – either a flat fee for all cards or different fees, depending on how much the card companies charge them.

How much should I expect to be charged?

According to the Financial Systems Inquiry, the three-year average merchant service fees are currently 0.5 per cent for Visa and MasterCard and 12 cents for debit systems.

The Reserve Bank also estimates that the average surcharge for high cost cards such as American Express and Diners Club is 1.8 percent.

How can I avoid paying a credit card surcharge?

It’s possible to avoid credit card surcharges in most cases, but it does depend on the payment options provided by the business.

Use your savings account

If you have a debit card, select "savings" instead of "credit" as this will be processed through the EFTPOS system rather than the credit providers' system.

Opt for a low cost credit card

Choose a credit card with lower merchant fees. For instance Visa or MasterCard currently charge less than Diners Club and American Express.  Often the merchant will charge you a lower or no fee for these cards.

Make PayPal your pal

Payment systems such as PayPal and BPAY can be great ways to avoid fees for online purchases.  The cost of using PayPal is paid for by the retailer, while BPAY is often provided as a free service by your bank, provided you use it through a transaction account.  Be aware, however, some banks do charge for this service so check this first.

Know your rights

Knowing your rights is important in making sure you don’t fall victim to a credit card surcharge rort. The Australian Competition and Consumer Commission (ACCC) says that it's the responsibility of retailers to tell consumers when a credit card fee will apply and how much that will be.  If they don’t do these two things you have every right to report them to the ACCC.

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Learn more about credit cards

What should you do when you lose your credit card?

Losing your credit card is a serious situation, and could land you in financial trouble. Here is a simple guide detailing what to do when you lose your credit card.

Lock you card – Contact your provider and inform them about your lost credit card. From here lock, block or cancel your card.

Keep track of transactions – Look out for unauthorised credit card transactions. Most banks protect against fraudulent transactions.

Address recurring charges – If your card is linked to recurring charges (gym membership, rent, utilities), contact those businesses.

Check credit rate – To ensure you’re not the victim of identity theft, check your credit rating a month or two after you lose your credit card.

Should I get a credit card?

Once you've compared credit card interest rates and deals and found the right card for you, the actual process of getting a credit card is quite straightforward. You can apply for a credit card online, over the phone or in person at a bank branch. 

How to get a credit card for the first time

A credit card can be a useful financial tool, provided you understand the risks and can meet repayment obligations.

If you’re a credit card first-timer, review your options. Think about what kind of credit card would suit your lifestyle, and compare providers by fees, perks and repayments.

Once you’ve selected a card, it’s time to apply. Credit card applications can generally be completed in store, online or over the phone.

When you apply for a credit card for the first time, you must meet age, residency and income requirements. As proof, you must also provide documentation such as bank account statements.

What should you do if your credit card is compromised?

Credit card fraud is a serious problem. If your credit card is compromised and you’re wondering what to do, here are a few precautionary steps to take.

Contact you credit provider – Get in touch will your credit card provider. If you feel your card has been compromised, you should be able to lock or block it.

Monitor your accounts – Keep an eye on your credit card accounts. Any unauthorised transactions could be a sign your credit card has been compromised.

Check your credit rating – It’s also important to check your credit rating, to ensure you’re not a victim of identity theft or some other financial mischief.

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 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.

How easy is it to get a credit card?

For most Australians, there are no great barriers to applying for and getting approved for a credit card. Here are some points that a lender will consider when assessing your credit card application.

Credit score: A bad credit score is not the be all and end all of your application, but it may stop you being approved for a higher credit limit. If your credit score is less than perfect, apply for the credit limit that you need, rather than the one you want.

Annual income: Most credit cards have minimum annual income requirements. Make sure you’re applying for a card where you meet the minimum.

Age & residency: You need to be at least 18 years old to apply for a credit card in Australia, and most require that you are an Australian citizen or permanent resident. However, there are some credit cards available to temporary residents.

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.

How do you cancel a credit card?

It’s important to cancel your old cards to avoid any additional fees. Unless you’re doing a balance transfer, you’ll need to pay the outstanding balance before you cancel your credit card. If you’ve opted for a card with reward points, make sure you redeem or transfer the points before you close your account. To avoid any bounced payments and save yourself an admin headache, redirect all your direct debits to a new card or account. Once you’ve done all the preparation, call your bank or credit card provider to get the cancellation underway. Once you receive a confirmation letter, destroy your card and make sure the numbers aren’t legible.

Can a pensioner get a credit card?

It is possible to get a credit card as a pensioner. There are some factors to keep in mind, including:

  • Annual income. Look for credit cards with minimum annual income requirements you can meet. 
  • Annual fees. If high fees are a concern for you, opt for a card with a low or $0 annual fee. 
  • Interest rate. Make sure you won’t have any nasty surprises on your credit card bill. Compare cards with a low interest rates to minimise risk.

How many numbers are on a credit card?

The numbers on your credit card actually follow a universal standard which is used to identify specific functions. Each credit card has a different amount of numbers. Visa and Mastercard have 16, American Express has 15 and Diner’s Club has 14. 

The first number on a credit card always identifies what type of credit card it is. Visa cards start with a 4, whereas Mastercard starts with a 5 and American Express with a 3. The remainder of the digits represent the account number, including the last number which is used to verify that your credit card is actually valid. 

Credit cards also have additional verification numbers, which are mainly used when the card isn’t present for phone and online purchases. These are the three-digit numbers on the back of Visa and MasterCard or the four-digit numbers on the front of an American Express card.

How do I apply for a credit card online?

What is a balance transfer credit card?

A balance transfer credit card lets you transfer your debt balance from one credit card to another. A balance transfer credit card generally has a 0 per cent interest rate for a set period of time. When you roll your debt balance over to a new credit card, you’ll be able to take advantage of the interest-free period to pay your credit card debt off faster without accruing additional interest charges. If your application is approved, the provider will pay out your old credit card and transfer your debt balance over to the new card. 

How to make a credit card online

If you’re wondering about how to make a credit card online application, here are some steps to follow:

  • Test the market. Many credit card options are available online. Compare providers by fees, interest and perks to ensure you’re getting the best deal.
  • Complete the application. Once you’ve selected a card, head to the provider’s website and complete the online credit card application form. Forms vary by providers.
  • Provide details. Most cards require you to meet age, residency, income and credit status condition, and you need to provide details like a bank account statement to prove this.
  • Review details. Ensure the information you’ve entered is correct.