Credit card surcharges need government action


CHOICE says Australians are being charged sky-high fees as airlines flout Reserve Bank rules 

A new survey commissioned by CHOICE has found that close to half of Australians who reported paying a credit card surcharge in the last three months say they were not offered or made aware of an alternative, surcharge-free payment method.1
 
The research also found that 44% of respondents Australia-wide who used their credit card in the past three months reported paying a surcharge. This makes it imperative that consumers are not being slugged with excessive charges.
 
Meanwhile the worst surcharging offenders are openly ignoring Reserve Bank of Australia (RBA) rules designed to limit these fees.2
 
“It’s now 72 days since the rules came into effect and in this time, the worst excessive surcharging offenders – Cabcharge, Qantas, Virgin Australia, Jetstar and Tiger – have continued charging Australians millions more in surcharges than it costs to process these transactions” says CHOICE CEO Alan Kirkland.3
 
CHOICE says it’s obvious the new surcharging rules are not working as intended, and has welcomed the Federal Government’s intervention, referring the issue to the Commonwealth Consumer Affairs Advisory Council.
 
“We urgently need strong enforcement and policing of the surcharging rules, beyond what Visa and MasterCard can bring to bear through their commercial dealings,” says Mr Kirkland.
 
To illustrate the excessive surcharge slug, CHOICE has crunched the numbers on a family of four flying from Brisbane to a selection of local and international destinations, and found the total surcharges ranged up to $100 or in one case, 17% of the total fare.
 
“For a family with two kids flying from Brisbane to Sydney return with Tiger, $49.95 per flight might look like a cheap ticket, but when you add $68 in surcharges, that’s a staggering 17% of the fare’s price,” says Mr Kirkland.
 
Excessive surcharges can be a real sting in the tail, turning what looks like a bargain into something more expensive, especially when so many consumers say they are not being offered another option.”
 
CHOICE is also calling on Australians to ‘dob in a dodgy surcharge’ by going to choice.com.au/takecharge and sharing examples of excessive credit card fees.
 
Media contact: Tom Godfrey, CHOICE Head of Media – 0430 172 669
Gemma Rasmussen, Communications Advisor - 0400 689 690
 
1.    CHOICE commissioned a nationally representative survey of 1,045 online Australians between 23 and 26 May 2013. The survey questions were part of a weekly omnibus conducted by Essential Research. When the 79% of respondents who reported using a credit card in the last 3 months were asked “At the time you last paid a credit card surcharge, were you offered or made aware of an alternative payment method that did not attract a surcharge?” 44% answered “No”.
2.    The RBA rules which came into force on March 18 were supposed to limit the surcharge amount companies can charge to the ‘reasonable costs’ of processing the transaction. While the actual costs of processing vary between retailers and across different card types, the average merchant service fee for MasterCard and Visa is estimated at around 0.86%, based on RBA data.
3.    It has been estimated that Australians are paying approximately $350 million more in credit card surcharges than it costs to process these transactions. Seehttp://www.tyro.com/win/news accessed on 27 May 2013.
 
To read more on CHOICE tests, reviews and campaigns, go to choice.com.au
 

CHOICE number crunch – examples of airline credit card surcharges (note – all examples were accessed from the respective airline’s websites on 22 May 2013):
 
Tiger Airways
Credit card surcharge: $8.50 per person per flight, domestic
Family: 2 adults, 2 children fly Brisbane – Sydney return
Fare (incl GST):  $49.95 per person per flight = Total: $399.60
Credit card surcharge total = $68.00
Total price = $467.60
Credit card surcharge % of fare = 17%
 
Qantas
Credit card surcharge: $7.70 per person per booking, domestic
Family: 2 adults, 2 children fly Bundaberg – Brisbane return
Fare (incl GST):  $89 per person per flight = Total: $712
Credit card surcharge total = $30.80
Total price = $742.80
Credit card surcharge % of fare = 4.3%
 
Virgin Australia
Credit card surcharge: $7.70 per person per booking, domestic  
Family: 2 adults, 2 children fly Brisbane – Mackay return
Fare (incl GST):  $49 per person per flight = Total: $392
Credit card surcharge total = $30.80
Total price = $422.80
Credit card surcharge % of fare = 7.9%
 
Jetstar
Credit card surcharge: $25 per person per booking, international
Family: 2 adults, 2 children fly Brisbane – Denpasar return
Fare (incl GST, taxes, etc):  = Total: $2,362.80
Credit card surcharge total = $100
Total price = $2462.80
Credit card surcharge % of fare = 4.2%


Read more at  choice.com.au/surchargesupdate

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Crackdown on credit card surcharges

The end of excessive credit card surcharges is on the horizon.

7 Mar 2013 | As of 18 March, surcharges applied to credit cards will be capped at a reasonable cost for the retailer.

 

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