Credit Card interchange fees: Should they be scrapped?
06 Sept 2016
New credit card surcharge restrictions came into force for large merchants on September 1st. Card issuer American Express would like to see merchants required to incorporate the cost of credit card use into the standard purchase price of goods and services rather than itemise it as a separate cost.
The federal government’s new Competition and Consumer Amendment (Payment Surcharges) Bill 2015 legislation has effectively banned excessive payment surcharges by federally-regulated businesses, requiring businesses that charge a surcharge for accepting payment by credit card to limit these charges to the reasonable cost of acceptance. Companies such as airlines and ticketing outlets will be among those that need to reduce their current costs.
Christopher Zinn, spokesperson for nationwide movement Surcharge Free (which is backed by American Express) offered the following comments on why he believes surcharges should be scrapped.
Q: In your experience is there any justification for a surcharge? Do businesses that charge a surcharge price the item any less than businesses that don’t?
A: No there is no justification for surcharging. There are costs associated with accepting all forms of payment whether that’s cash, EFTPOS or credit. But these costs are like any other cost of doing business such as electricity or labour costs, and should be factored into the total price of the goods or service.
It is unreasonable for consumers to be penalised for paying with a card, especially since the use of cash is on the decline and more and more people are using cards for their convenience. Also there are many benefits of accepting cards for businesses which is why most have a card payment terminal. Businesses need to realise that consumers strongly dislike being stung at the checkout by being asked to pay a surcharge. They need to ask themselves: “what final impression do I want to leave with my customers?”
Research by the Retail Doctor Group shows that one in four retail customers won’t return to a business after being surcharged. Businesses should stop focusing on the pennies they’re paying to process a card transaction (and these costs have been declining over time) and instead focus on the bigger picture of the dollars they’ll gain through improved customer satisfaction and loyalty.
We need to applaud businesses that take a surcharge-free stance and recognise them over businesses that do surcharge. Through the Surcharge Free campaign more and more businesses are uniting to show their commitment to the customer by scrapping surcharges all together.
Businesses that do surcharge do not price their items any less than businesses that don’t surcharge. In fact this is why the Government has intervened, as some businesses were clearly profiteering through the high surcharges they were passing on.
Q: Do you expect any of the big-surcharging business sectors (for example, airlines and ticket sellers) to scrap surcharges altogether?
A: Time will tell. There have been reports from a leading ticketing agency that ticket prices will be the same irrespective of whether customers pay by cash, debit or credit card. Let’s hope that’s the case and that others follow suit. We’ve certainly seen airlines including Qantas and Virgin announce changes in the lead up to today (1 September). While the payment fee changes they’ve announced will benefit many passengers using cards to book travel, many of those who are flying business or first class will in fact be worse off. The new cap for paying with a card is now $70 instead of $30 for international flights.
The hope of the Surcharge Free campaign is that more businesses realise the benefits that come with not surcharging and scrap these payment fees for good.
Q: In your opinion, does itemising a total cost (e.g. airlines that itemise airfare, seat allocation, luggage allowance, meal and so on) make it easier or more difficult for consumers to compare like for like products or services?
A: Some airlines itemise many of their services which can make it difficult for customers to determine the best final price. On the flip side, many consumers like the option of being able to nominate which services they want and don’t want, in order to travel cheaper.
What is clear is that the vast majority of travellers use cards to book flights, whether that’s online or via a travel agency. Paying with cards is not a luxury. It’s part and parcel of today’s marketplace and consumers should not be penalised for simply making a payment.
Credit card interchange fees
The different card providers (primarily Visa, Mastercard and American Express) charge different fees to merchants for the cost of card transactions.
Current Mastercard fees can be found here
Current Visa fees can be found here
Current American Express fees can be found here
