Much has been written lately about the credit card surcharges and whether or not merchants are taking advantage of the situation by charging in excess of what the actual fee costs. There is no doubt that this has and is occurring. The RBA card surcharging consultation paper says the average surcharge levels are around 1 percentage point higher than the merchant service fee for AMEX, Mastercard and Visa. So why do merchants impose a credit card surcharges and why would the RBA continue to let this happen?
In 2003 the RBA changed the rules to allow credit card surcharging. Their reasoning was to make the cost of credit card transactions transparent to consumers and they could choose which payment option to use. Until then the merchant service fees were all rolled into the price charged by the merchant and people using credit cards were effectively being subsidised by those using cheaper payment options.
The good news is that the RBA’s 2010 Consumer Payments Use study found that consumers paid a surcharge on only 5% of their credit card transactions. However they a found that surcharges were commonly paid in 44% of holiday travel industry transactions. These are typically online transactions where a credit card provides the most convenient and readily available payment option.
So the current system does have some flaws and some merchants are taking advantage of the situation however, it is transparent to the consumer and you can take steps to minimise what you pay. Here are a few tips that you can use to avoid or reduce the surcharge fees you pay:
- Don’t be afraid to ask for a reduction in the fee if you believe it to be excessive.
- Choose a payment option that doesn’t attract a surcharge.
- Ask if there is another payment option – for example many people may not realise that you can pay for your Qantas flights booked online via Bpay. They will provide the biller details in an email.
- Ask if there is a lower rate for another credit card.
- If you have to provide card details for security purposes at a hotel or car rental company do not automatically pay by credit card. Ask to pay the bill by EFTPOS or cash.
- Beware of the FLAT FEE surcharges (e.g. $7.70 for an airline ticket) as it can be a substantial % of the purchase price. $7.70 on a $100 ticket equals a charge of 7.7% whereas on a $1,000 it is a more reasonable 0.77%. So definitely look for other options in these circumstances.
- Take your business elsewhere.