RBA credit card surcharging ban still widely flouted

Monitoring and enforecement remain a work in progress.

Airlines still not getting the message

It's two years since the RBA gave credit card companies the power to put an end to excessive credit card surcharging, but the serial surchargers are still up to their old tricks.

As of 18 March 2013, surcharges were supposed to be limited to the "reasonable" costs of card acceptance. Two years later, unreasonable charges remain rampant.

The airlines, for instance, continue to slap on hefty extra charges for every passenger, even when the booking is made through a single credit card transaction. And while some state governments, including NSW and Victoria, have cut excessive taxi surcharges from 10% down to five percent, that's still well above the cost of processing the transaction.

The actual costs to the merchant are about 0.8% for Visa and MasterCard and two percent for American Express and Diners Club. Tiger Airways and other long-time offenders have routinely gone well above that. In one case CHOICE analysed, Tiger applied a 1479% surcharge mark-up on a $132 ticket. Qantas, Virgin Australia and Jetstar have all made comparable cash grabs.

What's the collective damage?  

Both Visa and MasterCard have joined the call to put an end to excessive credit card surcharging, but they also make a legitimate point – they lack the regulatory power to make that happen on their own. According to the latest research data made available by MasterCard, Australian consumers are being surcharged about $1.6bn a year – and they certainly don't like it either.

A consumer survey by RDG Insights completed in February found that 93% of Australians want to see surcharges go away for good, and about a third of the 1120 survey participants had lodged a surcharging complaint.

The way forward

Earlier this month, the RBA released yet another report on the issue of excessive surcharging and made some interesting suggestions, such as setting a cap on the fixed-dollar extra charges that are routinely applied to airline tickets and other services (currently $17 per passenger for a domestic return trip on Jetstar or Tiger, for instance).

We're not so sure such belated measures are going to make a difference, nor are we on board with the Financial System Inquiry's conclusion that government regulation of surcharging would be administratively impractical and too expensive.

CHOICE maintains an excessive surcharging ban can be enforced by a regulator who has powers to demand documents that demonstrate surcharges are in line with the real costs of the transaction – and one that can issue significant penalties for non-compliance.

We think the cost of regulation needs to be weighed against the estimated $1.6bn a year consumers are paying in excessive credit card surcharges.