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.