If you’re feeling a bit hopeless about your credit card balance, don’t despair just yet. As of 18 March credit card companies have been advised by the Reserve Bank to limit the charges levied by retailers, for customers to use debit, charge and credit cards in-store to pay for their purchases. The extra 4% currently being charged by a number of retailers could be slashed down to just 1%.
Credit card holders stand to come out on top if the plans go ahead, as $440 billion in charge, debit and credit card transaction fees was racked up last year by locals. While some purchases are exempted from the extra costs, clothing, food and petrol sales are most commonly levied with the surcharge.
Critics say it is up to the banks that are imposing higher charges on smaller retailers to support consumer rights. The major banks are making large profits while retailers, by contrast are struggling to make ends meet. If the banks drop their interbank charges retailers will have the scope to reduce their credit card charges too. Surcharges were introduced with the permission of the Reserve Ban in 2003.
But the banks have been accused of recovering more than just their costs; critics say they are generating extra revenue streams with the levies. They say the costs of offering the service amount to less than 1%. Compared to making EFT payments credit card costs are now way out of the market, and the decline in new accounts is testament to the way that they have fallen out of fashion so fast.
According to local research the transport industry is levying some of the highest charges, up to 10% in some cases. Airlines and taxi services have been singled out as charging excessive credit card fees. One notable example is a return flight from Sydney to Melbourne, which costs $70 on average but which accrues a $17 surcharge if you pay by credit card, which is 24% of the total.
Critics also say that the public has an important role to play in whether the move goes ahead, and have urged the public to support the cap on surcharges.
The debate around credit card charges has been bandied about since June last year but after some delays, things are set to move ahead from the 18th of March. And while the reforms do not wipe out levies and surcharges entirely they do enable the credit card companies to restrict the charges to what has been defined as “reasonable cost of card acceptance.”
The average card transaction costs 0.86% of the transaction value, which is significantly lower than the 4% being charged in most cases. In 2010 the average surcharge for an airline was $3.50 per flight which has increased to between $7.70 and $8.50 per booking.
For those who want to keep their credit cards and manage their debt efficiently there are two possible options. One is that the cost of using your credit card could be coming down, if surcharges are reduced. Use the opportunity to switch to another provider at lower interest, and also benefit from the reduction of surcharges on credit card payments. For many people the combination of these two factors could make owning a credit card more viable again.
In fairness credit card companies have made it more convenient for retailers to offer their services over the years with wireless credit card payment systems now becoming commonplace. The wireless systems enable retailers to accept credit cards at any point, and any time. They also free up a landline, which is practical in a busy environment, and save you on your monthly telephone bill. They make the process more efficient for staff and customers and employees do not have to go running around looking for change.