Credit card reforms not working

A year ago today the Reserve Bank of Australia (RBA) introduced new rules in an attempt to limit credit card surcharges. The rules aimed to reduce these surcharges so that they were only covering the reasonable cost of the transaction, rather than being a sneaky way to raise revenue. But new data, collated by MasterCard, shows that these reforms are not working.

These rules do not apply to the charges incurred when an account is overdrawn. The reforms are specifically targeting the amount retailers charge customers for the privilege of using their credit cards to pay for goods and services.

Over the past year Australians have paid $800 million in credit card surcharges – that’s an average of $100 per household, just in transaction fees. MasterCard has said that the main offenders are airlines, taxis, major hotels and utility companies.

Chief executive of consumer group Choice, Alan Kirkland, told the ABC, “Surcharging should be reduced to a reasonable level, which RBA data shows on average to be less than one per cent for merchants processing transactions through Visa and MasterCard.”

Earlier this year, Choice compared surcharges paid for Qantas flights from Sydney to Melbourne. It found that passengers can still pay 523 per cent more than the average merchant service fee, which has not dropped significantly from the 568 per cent being paid in March last year when the RBA reforms came into place.

The Federal Government has urged consumer agencies to monitor credit card providers, in order to gain transparency into currently hidden fees and charges.

In the meantime, while the RBA considers other ways to reduce merchant fees, what can you do if you feel you have paid an excessive credit card surcharge?

  1. Contact your credit card provider and report the retailer. VISA cardholders in particular are on solid ground, as VISA was the first company to come forward when the regulations were announced last year, promising it would use the new rules to come down hard on retailers abusing the system.
  2. You can also report the retailer to your state-based fair trading office. The more complaints received against a retailer, the stronger the case against them.

Find out more at the ABC News website

You can read more about the specifics of the reforms at the RBA website

Opinion: Australians are paying too much

The Australian public knows that any credit card surcharge higher than one per cent of the total bill is too high. The RBA knows that these surcharges are too high. Even the credit card companies know. So why can’t, or won’t, the credit card companies enforce the new rules the RBA brought in a year ago to bring these surcharges down?

By the general non-reaction of retailers to these rules, I can imagine the RBA sending out its edict a year ago, clearly laying out the new regulations and stating, in no uncertain terms, that the surcharge gouging was to end. I can also imagine the retailers receiving these letters, having a chuckle, and then promptly feeding them through their shredders.

Yes, some retailers stopped overcharging on credit card fees. Jetstar, for example, no longer asks you to pay for the privilege of using your credit card. Instead it simply charges an $8.50 booking and service fee. Given that you are the one keying in all your details, choosing the flight, selecting your seat, checking in online and printing your own boarding pass, I fail to see how it can cost them $8.50 to perform these tasks. But then I suppose I don’t run an airline, so what would I know? As an aside, if you wish to become one of the 45,000 Australians to sign the petition for Jetstar to drop this fee, you can add your name to the list at the Change.Org website

Often we don’t realise when a surcharge is being added to our bill. If we don’t start to say no to these surcharges, Australians will simply end up paying another $800 million this year in credit card surcharges. So check your credit card statement and your receipts. If you have been charged over one per cent of the total bill as a surcharge, report it to your credit card company. You could even ask them to refund you the difference. Credit card companies are the only entities which can enforce the RBA laws, so if their customers are unhappy there is a much better chance they will start to take action.

What do you think? Does giving retailers money for nothing, in the form of exorbitant credit card surcharges, make you angry enough to act? Or is it just too much of a hassle to worry about?