Credit Card Surcharges To Be Restricted

Credit Card Surcharges To Be Restricted

The good news? Excessively large surcharges for using credit cards are going to be eliminated, with card providers such as Visa and Mastercard allowed to restrict the level of surcharging by merchants that accept their cards. The bad news? The change won’t happen until January 1 2013 and the charges won’t disappear altogether.

Picture by InfusionSoft

The Reserve Bank announced the changes yesterday, saying that there is an evident “increase in cases where surcharges appear to be well in excess of acceptance costs or where surcharges are ‘blended’ across card schemes even though merchants’ acceptance costs may be higher for some cards than others”.

We noted research last year which suggested that credit card surcharges were much higher than the cost of providing them, effectively providing a profit centre for many businesses. The change to regulations in 2003 to allow surcharges to be passed on to consumers was designed to foster increased competition, but as that evidently hasn’t happened in some sectors, it’s good to see the Reserve Bank modifying its approach.

Note that this doesn’t mean that surcharges will be eliminated; it simply means that individual card providers can require businesses that accept those cards to limit surcharges to “the reasonable cost of card acceptance”. In practice, that can include both the merchant service fee and other costs (such as currency conversion fees and the costs to business of renting credit card processing equipment or services).

We’ll have to wait and see how much practical difference it makes and how large companies will try and justify their existing charges. Mastercard has already indicated it intends to ensure that customers aren’t charged excessively, and it’s hard to imagine Visa won’t follow suit. As ever, paying through means other than a credit card may well prove cheaper regardless of the change in rules.

Reserve Bank


  • I’m hoping these changes will mean that American Express charges will decrease also (ideally most places would find the charge so small that they just absorb the cost and don’t charge a credit card fee), as I never use it unless there is no charge to do so. However these changes may mean even more merchants refuse to accept it.

    • Problem is that American Express surcharges are needed, because the company that provides the cards charges the retailers extra to be able to accept the cards. Its the reason why American Express is not in all places that accept credit cards, because the cost of using their system is more than they would get from people who only have an american express card.

      • Thanks for that alphamone; I wasn’t aware that it’s a different system (although I knew that they were charging retailers a fee). Nonetheless I wouldn’t complain if the fees were waived completely and everywhere accepted Amex. 😀

    • I think Jetstar charges $30 / transaction on a non Jetstar credit card. This is a ridiculous fee and is only advised at the checkout process.
      I recently ate at a local cafe and they then charged me $2 to pay with my credit card. That was a flat fee and could equate to as much as 10% if they had a minimum $20 card purchase.

      Businesses should be forced by the ACCC to disclose payment option charges at the start of or before any ordering process begins. This would give the consumer informed consent when making the purchase and increase competition in payment option surcharges.

    • They made that system “better” already, instead of a hidden fee of 50c for each transaction that you don’t see till the end of the month they give you forewarning of your fee which is now $2-$2.50. So much better!

      • It’s great that they warn you about it now yes. However I would like to be able
        to just go to any old ATM to get some cash out, instead of walking to the other
        end of the city because my bank was too arsed to put an ATM close to where I work?

  • I find it fascinating that the smaller the business, the less likely there is to be a surcharge. I doubt Telstra or AGL are charged 1% merchant services fees because of volume, but they pass on 1% or 1.1% for the use of the card. Yet other businesses such Austar, SA Water, my local council, the local schools or my Gym don’t charge a surcharge at all. I switched engery retailers when I found a reasonable Usually, the higher the volume, the lower the merchant service charge in my experience. Through my hobby, almost all of my suppliers charge 1-1.1% on top for a credit card transaction. IIRC, handling cash or cheques does cost more than the relative transaction for the credit card.

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