Shopping online is fast, convenient and offers potential savings on everything from clothing and furniture to airfares.
But while you can now shop whether you are at home, on your lunchbreak or out and about, the fees often charged when you pay by card take some of the value out of shopping online.
There are surcharges for paying by card, international transaction fees and all kinds of additional, unplanned charges that can push the final bill beyond your budget.
While it is easy to see the reasons behind some of these charges – such as international transaction fees or currency conversion costs that banks charge to make the payment processing costs more affordable – others could be hidden in the payment process. Not only is that frustrating, it can make the whole shopping experience feel like a rip-off.
The good thing, however, is that the more you know about these fees, the easier it is to balance them out (or find an online store that does not apply them).
So where do you get started? This resource page covers different types of debit card charges you come across online and how you can get around them to save even more money.
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Both bricks-and-mortar and online retailers can apply a surcharge when you choose to pay with your debit card. This fee was originally designed to offset the cost a merchant has to pay to process card transactions.
These “usage fees” are typically charged by card and payment processors and can take a toll on any merchant’s bottom line, so a surcharge can make it more affordable for smaller and bigger merchants to accept a wide range of cards.
But in recent years, card surcharging has become a very controversial topic, with some merchants adding over 10% to the total transaction cost – well over the 0.8% to 2% they would need to offset their own card processing fees.
In fact, a 2014 report from MasterCard found that Australians pay over $1.6 billion on surcharges annually, with individual cardholders estimated to shell out around $130 in a year.
“Some merchants are surcharging at levels which are really unfair to consumers, and there is effectively no government enforcement around this,” MasterCard Australia’s Vice President of Public Policy & Corporate Affairs, Brent Thomas, said in a press statement about their findings.
“Right now there is no effective enforcement of the surcharges which merchants can apply,” he explained. “The charges simply need to be ‘reasonable’ – leaving it open to interpretation and debate.”
As a result, debit card and credit card surcharges are an ongoing issue for Australian consumers, to the point that the word “surcharge” is not often seen anymore.
Instead, the charges that paying by card can attract are couched in terms such as “convenience fee”, “card payment fee”, “online booking charge”, and many variations. Whatever the name attached to this fee, it can add a lot of money to purchases – both offline and online.
But when it comes to online surcharges, Australian merchants legally have to give you at least one other payment option that does not come with a surcharge (or a similar fee under a different name).
These alternatives often include BPay, PayPal, POLiPay, bank transfers or company-branded payment cards, like the Qantas Cash prepaid debit card, which waives card payment fees if you book your airfare within seven days of flying.
Every online merchant varies in their charges and conditions, so check the different payment methods available before you go ahead with a transaction to avoid any surcharges.
2. International transaction charges
There are two main ways international transactions affect the cost of purchases. First, there is the conversion rate applied to purchases made in another currency (eg US dollars or British pounds).
The exchange rate applied may vary day-to-day or week-to-week depending on your debit card issuer, but the transaction itself will still come out of your account in Australian dollars. So if you made a purchase for US$300, for example, it might show up as $323 (or something similar) on your debit card statement.
Most people have a general understanding of exchange rates, but it is important to factor them in before you make an online purchase so that you know how much of your money you are really spending.
The other charge that you have to deal with for overseas shopping online is what’s commonly called an “international transaction fee”. Banks and other card issuers apply this fee to cover their costs when processing foreign currency transactions, and it typically ranges from 2% to 3% of the total purchase price.
Depending on the international transaction fee applied by your debit card provider, that means you could pay $2 to $3 for every $100 you spend with an overseas retailer.
If you want to avoid this fee when you pay with a debit card, shop around for an account that does not apply charges for overseas purchases, like the Citibank Plus.
Multicurrency cards are another option growing in popularity. These prepaid debit cards are available from banks and independent issuers like Australia Post, Qantas and Virgin Australia.
With a multicurrency debit card, you can load money in the currency used by an online store, and pay with it to avoid these charges completely. These cards also mean you know exactly how much money you have available to spend in a particular currency, before you even start shopping, so they can be a great option if you need to stick to a budget.
For starters, there is the potential risk of charges if you accidentally go over the limit of your account. This over limit, overdrawn or “dishonour” fee is particularly important to consider when dealing with online retailers based overseas.
Say, for example, you are shopping with a UK retailer and have $400 in your account. If you spend £300, you would end up overdrawn on your account (depending on the exchange rate), resulting in additional fees to your bank, and also to the retailer in some cases.
The easiest way to avoid this dishonour fee is to check any relevant exchange rates and keep track of your balance through internet banking, so that you can see exactly how much money is left on your debit card.
Additional transaction charges are another unexpected cost that sometimes applies if you have a bank account that sets a limit on your monthly transactions (or has conditions for unlimited transactions). Extra electronic transaction costs are usually around $0.50 each, but it does vary depending on the bank and type of debit card you have, so it’s worth reading over the terms and conditions.
If in doubt, remember you can call your debit card issuer to see what types of fees shopping online could attract and ask them for advice on how to avoid any charges they could apply.
Drip pricing is a strategy used by some merchants, where the price initially advertised is increased throughout the payment process through additional features, services or convenience charges that may or may not be unavoidable.
The tactic has been noticed by the Australian Competition and Consumer Commission (ACCC), which says it is easy to be misled or “become invested in long and complex booking processes” when shopping online.
“Not only can this practice lead to consumers potentially being misled, it may also make it difficult for businesses with more transparent pricing practices to compete on a level playing field,” ACCC Chairman Rod Sims said in a press statement about drip pricing issues in July 2014.
To avoid drip pricing charges, the ACCC recommends taking note of known companies that use drip pricing practises, shopping around and reading the fine print for different online stores, being prepared to back out of transactions when additional charges arise and looking out for pre-selected options (such as insurance or a certain type of shipping) as you go through the payment process.
If you do feel like a particular online store is misleading you through the payment process, you can also lodge a complaint with the ACCC.
There are all kinds of different charges that come from shopping online, as each section above reveals, and it is often challenging to avoid them all. But you can save money by being aware of the different costs you could come across and considering different ways around them.
It is also a good idea to factor additional charges into your budget, both for debit card fees and other charges like shipping. Some of the other ways you can save money when you shop online include:
- Tracking your debit card spending through internet banking or a mobile app,
- Pre-loading the money you plan to spend on a multicurrency debit card,
- Comparing prices and additional charges for several different online stores,
- Contacting retailers or lodging complaints with authorities like the ACCC if you feel you are being ripped off,
- Ordering as much as possible from one online store so that you can save on shipping costs; and
- Setting up a budget for online spending (and sticking to it).
It is also important to consider the alternative payment methods offered by each retailer to see whether there are fewer or lower fees available. Some retailers, for example, do not apply surcharges for PayPal or direct debit transactions.
The terms and conditions for fees do vary from business to business, however, so alternative payment options may not always be fee free. Checking with each retailer before you pay, and/or sticking to retailers whose payment options you are familiar with helps get around these types of fees (or at least plan for them).
Another good idea if you plan to make a lot of purchases on the web is to get a debit card specifically for online shopping. Whether this is an everyday debit card that has features that complement online shopping (like no foreign transaction fees), or one of the many prepaid multicurrency options now available, it is easier to check how much you are really spending when you stick to just one card.
It can also help keep your account protected against online security risks and make sticking to a budget more achievable by giving you more control over the balance.
Just as there are many different online stores to choose from, there is a wide range of debit card fees that could be charged. But being aware of these costs and the different ways around them means you can make shopping online both convenient and affordable.