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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