Credit card surcharge crackdown

ACCC now has the power to investigate sky high surcharges.

Crackdown on sky high surcharges

Australian consumers may soon be better protected against excessive credit card surcharges. The federal government has passed legislation giving the Australian Competition and Consumer Commission (ACCC) the power to crack down on companies slugging customers with surcharges up to 1000% above the real cost of processing credit card payments.

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The long-running rip-off

For many years businesses as diverse as airlines, ticketing companies and taxis have punished consumers who pay with credit cards with excessive surcharges that don't reflect the real cost of processing a credit card.

We recently conducted an analysis of airline credit card surcharges and found that the booking fees didn't match the actual cost of putting the payment through via a credit card. Some of the more startling examples we found were the Qantas $7 surcharge on a cheap flight that was 348% higher than it should have been, and Jetstar's $8.50 surcharge which was a massive 1187% mark-up (see the table below for more examples).

Bill gives power to ACCC

The Competition and Consumer Amendment (Payment Surcharges) Bill 2015 passed by the Senate today will see some genuine power for these charges to be investigated. Many companies with excessive surcharges had faced bans from the Reserve Bank of Australia (RBA) but had been able to ignore the rule and continue to charge the fees. "We are delighted that the ACCC has finally been given the power to investigate if a surcharge is fair and issue infringement notices of up to $108,000 for companies that don't play by the rules," says CHOICE spokesperson Tom Godfrey.

Yet while it's good news in the long run, it's important to note that the new laws won't come into effect for a couple of months while the Reserve Bank finalises regulation. In the meantime, we'd like to see the main offenders do the right thing and drop their surcharges before the laws take effect. After all, what better way to put your customers first?  

Airlines and sky high surcharges

A CHOICE investigation showed that airlines were some of the worst offenders when it comes to credit card surcharges, massively marking up the cost of credit card booking fees, in some cases by over 1000%:

Airline mark-ups on credit card fees
Airline Ticket cost* Card payment fee Likely average fee incurred by merchant** Percentage mark-up
Qantas $200 $7 $1.56 348.72%
Virgin $135 $7.70 $1.05 633.33%
Jetstar $85 $8.50 $0.66 1187.88%
Tiger $95 $8.50 $0.74 1048.65%

*Flights selected were Sydney to Melbourne morning commuter flight on Monday 29 February 2016. Cheapest flight before 9.00am selected. Flight costs and booking costs reviewed between 11.00am and 11.15am on Tuesday 2 February 2016.

**Percentage mark-up calculated on RBA 2015 average merchant service fee of 0.78%.