New rules around credit charge surchages and the levels merchants can charge came into force today with Visa jumping in as the first credit company to ban excessive credit card fees.
Under the new rules the Reserve Bank of Australia is giving credit card companies the power to force retailers to limit what they can charge consumers to use credit and debit cards.
Retailers will no longer be able to charge up to 4 per cent for a credit card transaction, and will be restricted to as little as 1 per cent.
The changes come at a time when Australians are spending $440bn on credit, debit and charge card transactions with use of cards continuing to increase.
This included $208bn on Visa and MasterCard credit cards, $130bn on eftpos cards, $54bn on AMEX and Diners Club charge cards and $49 billion on Visa and MasterCard debit cards.
Consumer advocacy group Choice, which has campaigned strongly for new laws to stop excessive surcharging by retailers, has categories such as airlines and taxis in their main firing line following its research that has shown they are the biggest offenders when it comes to over-the-top fees.
However, its research has also revealed that Holiday/travel and Restaurants/Formal dining were two of the top five categories identified by consumers as areas that they had seen surcharges imposed by.
Choice's Matt Levey said the categories came in at number four in the research it conducted in 2010 with the NSW Department of Fair Trading.
"Of course you can argue that's because hospitality is an industry where people are more likely to pay by credit card and that research wasn't saying that [they were charging excessive fees]," Levey told Hospitality.
"Certainly we are focusing on areas like the airlines and taxis because their charges are particularly steep."
Levey said that under the new rules merchants will still be able to charge fees to customers to recoup the cost of offering the credit card facilities.
"This is just about excessive surcharging," he said. "We accept that there is an additional cost involved in processing a credit card - we aren't arguing that and neither is the Reserve Bank.
"What they are saying though is that the cost of using a credit card is basically something that can be recovered as cost recovery, not an excuse to try and raise additional revenue or price gauge."
The hotel industry said the changes were likely to have a major impact for hotel customers because hotels have not been guilty of charging excessive surcharges.
"Hotels aren’t profiteering from surcharges like some other industries appear to be," said the Australian Hotel Association's corporate affairs manager Steven Fanner.
" Many hotels do not surcharge at all, and most are simply looking to recover their equipment and access costs from providing credit card payment facilities, which is permitted under the new standards.
He said that hotels that previously applied a single surcharge across all card types will need to consider their strategy in light of the changes.
"It would have been preferable for the RBA or ACCC to take up a regulatory role to provide clarity to merchants about what is an acceptable surcharging practice. The credit card companies are now responsible for enforcing their own rules. The AHA has written to each of the main credit card providers seeking information on their approach to the new standards, although we have not yet received a response."
Research conducted by Restarant and Catering Australia in 2011 as part of its response to the Reserve Bank's review of surcharging found that 73 per cent of its members' annual transactions were by card.
In its submission the R&CA said it believed the instances of merchants in the restaurant industry charging excessive surcharges on credit cards would be lower than other industries.
"R&CA believes some of its members may take advantage of the ability to surcharge and could possibly be using this method to recover costs of card acceptance to the detriment of customers, " it said in its response.
"However this number would be low compared to other industries."
The research found that 85 per cent of respondents said they did not pass on a surcharge to their customers.
Of the six per cent who did the average value of the surcharge was between two and three per cent.
There have also been calls for banks to assist small businesses by not imposing excessive fees.
Independent eftpos provider Tyro Payments chief executive officer Jost Stollmann said while the changes would benefit consumers, the major banks had a responsibility to help bring down costs for struggling retailers.
“If excessive surcharging on all credit and debit card transactions was removed it would save the Australian consumer an estimated $350 million a year,” Stollmann said.
“Often consumers are charged nothing to use their credit cards, but in many cases they do have to pay a fee, for petrol, clothing and food. It can be for anything. The major banks impose unnecessary costs on small retailers, who then pass the costs onto consumers.
“Banks are making record profits, while retailers are struggling to survive. Banks need to lower their ‘interbank’ fees, which will give retailers the capacity to lower credit card fees for consumers.”