Reserve Bank suggests curb to merchant credit card surcharges

Finance-iconThe Reserve Bank wants merchants to limit the surcharges they impose when customers use credit cards, but may still permit over-charging consumers under some circumstances.

Merchants who charge their customers a surcharge to use their credit cards may have to ensure it is no more than a “reasonable cost of acceptance” after the Reserve Bank decided some merchants were overcharging.

The Reserve Bank signalled its intention to investigate credit card surcharges in June 2011, because some merchants charged a blanket surcharge to accept credit cards even though the fees they paid each credit card company differed. Mastercard, for example, was found to charge merchants 0.86% of a transaction’s value while American Express charged 1.86%. Many merchants simply slapped a 2% surcharge on all transactions, pocketing a decent margin along the way.

The Bank asked for input on what to do about this situation, has since digested submissions and now wants the standards covering surcharges to change so they “limit surcharges to a reasonable cost of acceptance, while still ensuring that merchants cannot be prevented from fully recovering their costs.”

That decision doesn’t mean merchants need to change their surcharges overnight, because the Bank is now asking for comments on a document titled “A variation to the surcharging standards: A consultation document.” (Link to PDF download).

The Bank is also at pains to point out that the new guidelines are “…focussed on improving the efficiency of the payments system and may not necessarily address all surcharging practices that are viewed by the public as being of concern.”

One of those practices, averaging surcharges across credit card providers so that some consumers pay more than the cost of a merchant for their particular transaction, is even suggested by the new guidelines as one option for future surcharging.

The decision was nonetheless welcomed as a win for consumers by MasterCard’s Vice President of Strategy and Corporate Affairs David Masters.

“This is a significant step forward in protecting consumers from excessive and unfair additional fees imposed by some merchants on card transactions that have been frequently disproportionate to the cost of accepting card transactions,” Masters said.

In a blog post, CHOICE’s head of campaigns, Matt Levey, also welcomed the decision.“Today’s decision from the RBA will mean no more cream on top of transaction costs for those excessively surcharging, ensuring consumers no longer have to pay extra just for the privilege of paying.”

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