D-Day for excessive credit card charges
Consumers will no longer have to pay excessive fees every time they use their VISA cards, saving them an estimated $100 million per year.
VISA has announced that from today all businesses that accept Visa cards in face-to-face transactions must restrict any surcharging to as little as 1%. More than 36% of Australian businesses, or 100,000 companies, impose some type of ‘surcharge’ on a customer’s bill.
VISA’s move will now put pressure on MasterCard, AMEX and Diners Club to follow suit. AMEX and Diners Club card transactions attract surcharges of 3-4 per cent.
“If all credit card companies follow VISA and outlaw excessive credit and debit card surcharging, it will save the Australian consumer an estimated $350 million a year,” Tyro Payments CEO Jost Stollmann said. “The changes would benefit consumers, but the overwhelming majority of Australian small businesses were already doing the right thing.
“Almost 65 per cent of Australian businesses, or about 200,000 companies, impose no surcharge at all on credit card transactions, while absorbing the fees the large banks impose on them,” Mr Stollmann said. “The truth is many small businesses are being forced to fund the lucrative loyalty programs of the major banks, by absorbing these costs. The banks have an obligation to lower their credit card fees on small business. They are the ones out of step with community opinion.”
The ramifications are huge, with Australians spending a staggering $440 billion on credit, debit and charge card transactions last year. This included $208 billion on Visa and MasterCard credit cards, $130 billion on eftpos cards, $54 billion on AMEX and Diners Club charge cards and $49 billion on Visa and MasterCard debit cards.
The average surcharge paid by consumers for Diners Club is 4%, for American Express 2.9%, for Visa 1.9% and for MasterCard 1.8%1. In taxis, customers are forced to pay 10% when paying for their trip with a credit card. In May 2012, the RBA announced that credit card companies had the right to restrict surcharging from 18 March 2013.
VISA is the first credit card company to take up the right, but only informed Tyro Payments 11 days ago it was doing so.
“Many retailers will be unaware of these changes,” Mr Stollmann said. “How are retailers going to prepare for the change, adjust their systems and train their staff in time to avoid breaking their obligations under their contracts? How will retailers deal with customer complaints about surcharging, when they have not been given time to prepare for the changes?”
Retailers who refuse to comply with the lower charges face warnings, unspecified fines and ultimately possible termination. Tyro is working furiously to provide its customers with the tools needed to calculate the correct surcharge and to launch a fully automated and compliant surcharging feature on the EFTPOS terminal.
The use of surcharging has grown dramatically in recent years, and is most common among large retailers who wield strong market power. Forty-four per cent of large retailers charge customers to use credit cards, compared to only 23% of small businesses.