Debit card and credit card surcharges have cost Australians an estimated $800 million in the past year, according the latest industry reports.
Data collated by MasterCard shows that the average Australian household is paying an average of $100 in card surcharges every year, to the tune of $800 million in total.
These figures, which are based on the estimated value of total credit and debit card transactions that are surcharged in Australia, show that the majority of surcharges come from airlines, although taxis, hotels and major utility companies also add to the cost of paying by card. And consumer advocates and the media have started making noise over these costs, with consumer watchdog CHOICE leading the charge.
CHOICE says 12 months on from the introduction of rules designed to rein in excessive credit card surcharges, Australia’s worst surcharge offenders are continuing to take consumers for a ride.
“Surcharging should be reduced to a reasonable level, which RBA data shows on average to be less than 1% for merchants processing transactions through Visa and MasterCard,” CHOICE CEO Alan Kirkland says.
Earlier in 2014 CHOICE found that consumers flying Qantas from Sydney to Melbourne can still pay a staggering 523% more than the average merchant service fee, only a slight improvement on the charges from March 2013.
At that time, just prior to the introduction of the Reserve Bank of Australia’s reforms, the Qantas surcharge for card payments was $7.70. In December 2014 it went down just $0.70 to $7.
Virgin Australia, on the other hand, charges a $7.70 booking and service fee for payments made by debit card, credit card or PayPal, while both Tigerair and Jetstar charge $8.50 per flight, per person for domestic travel.
CHOICE says any changes made since the reforms have been limited and minimal at best due to a lack of enforcement.
“Unfortunately no-one was put in charge of policing or enforcing the rules, leaving the likes of Cabcharge, Qantas, Virgin Australia, Jetstar and Tiger to continue using card fees as a sneaky way of raising additional revenue,” Kirkland says.
Complex Card Surcharges
While the views put forward by MasterCard and CHOICE have been picked up by the mainstream media – particularly the $800 million figure – other experts suggest taking a closer look at the issue of surcharges before jumping to conclusions.
Finance and economic commentator Michael Pascoe, for instance, says some of the blame also lies with credit card and debit card companies.
“What the RBA did last year was to empower card issuers to forbid merchants making excessive surcharges – but the card companies are all too mimsy to risk offending any of their merchant customers,” he explains in an article for Yahoo Finance.
“It is perhaps understandable that card company A doesn’t want to risk being the odd one out in calling, say, Airline X, to account for abusing its customers. If A bans X from imposing an excessive surcharge, X might simply refuse to accept A’s cards, giving all the business to card companies B, C and D.”
Meanwhile, the Federal Minister responsible for consumer affairs, Small Business Minister Bruce Billson, argues that the guidelines have actually had “some impact” but that further government action will be taken if improvements do not continue.
“If we can’t get the outcome that’s needed and the reasonable pricing of credit cards to conclude transactions then a further regulatory response may well be justified, but we are urged to give this Reserve Bank framework 12 months to run,” Billson says in an interview with ABC Radio National.
He has indicated, however, that intervention will be an absolute last resort, with Billson encouraging consumer groups to keep running their campaigns and suggesting consumers should also take an active role in complaining to organisations they feel are charging too much for payment by card.
“We’re trying to be thoughtful when bringing about additional regulation to an economy that’s already groaning under too much,” he says.
Tips To Avoid Card Surcharges
At the moment cardholders are basically expected to bear the brunt of these costs, whether they pay with credit card or debit card.
So how can you save money on surcharges until things change for the better? While there are only a few options, some of the strategies you can consider include:
- Paying for taxis with cash to avoid CabCharge fees,
- Checking to see if your bank is accepted through POLiPay – which Qantas, Virgin and Jetstar say is a charge-free option,
- Shopping around for the cheapest deals (including surcharge costs); and
- Choosing a card that is exempt from these fees, like a Jetstar credit card or the QantasCash prepaid debit card (which waives domestic booking fees).
Some of the surcharge-free card options do come with certain terms and conditions that need to be met before your are eligible, but they are worth considering if you travel a lot and want to save some money on all your bookings.
Otherwise it may be a matter of planning ahead for costs, and voicing your opinion by signing petitions or lodging complaints with companies that are charging a lot for card payments.
But hopefully, in the near future, it will be easier and more affordable to pay with a card and avoid a surcharge in the process.