Credit Card Surcharge

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Forums › Finance and wealth management › Credit Card Surcharge

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#290404 15-Jan-2010 19:05

robbyp: I use cash or eftpos anyway. I mainly use credit card for online purhcases, or from comapnies that I have to order a product through, just in case they end up going out of business before they supply it. If I was getting airpoints I may use it more, but someone has to pay for those airpoints. Perhaps the most fair way of doing it, is the CC compony charging their cusomters directly for each transaction, but then many people wouldn't use them The CC's have come out complaining about retailers, becuase this change by the comcom will probably mean that CC's are used less, which means less profits by the CC companies. This change is perhaps a good thing for NZ, as our amount of personal borrowing is way out of control.

It annoys me. I live entirely off my credit cards, because I travel, and so I don't have a "NZ EFTPOS card", an "Australian EFTPOS card", a "Singapore EFTPOS card", etc. Many other tourists and business travellers are like this as well -- which projects a rather negative image of NZ (or other surcharging countries).

So, I will pay with a credit card -- or with cash, which is much more expensive for a merchant to handle.

These fees really started annoying me in 2008/2009 when many hotels across Australia introduced credit card surcharges for paying their bills - which is unreasonable given that it is often the ONLY way to pay for a hotel (given the practicalities of carrying thousands in cash, and EFTPOS transaction limits). This caused me to keep moving my business away from hotels which charged this until I ran out of options :(.

robbyp

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#290421 15-Jan-2010 21:23

PenultimateHop:
robbyp: I use cash or eftpos anyway. I mainly use credit card for online purhcases, or from comapnies that I have to order a product through, just in case they end up going out of business before they supply it. If I was getting airpoints I may use it more, but someone has to pay for those airpoints. Perhaps the most fair way of doing it, is the CC compony charging their cusomters directly for each transaction, but then many people wouldn't use them The CC's have come out complaining about retailers, becuase this change by the comcom will probably mean that CC's are used less, which means less profits by the CC companies. This change is perhaps a good thing for NZ, as our amount of personal borrowing is way out of control.

It annoys me. I live entirely off my credit cards, because I travel, and so I don't have a "NZ EFTPOS card", an "Australian EFTPOS card", a "Singapore EFTPOS card", etc. Many other tourists and business travellers are like this as well -- which projects a rather negative image of NZ (or other surcharging countries).

So, I will pay with a credit card -- or with cash, which is much more expensive for a merchant to handle.

These fees really started annoying me in 2008/2009 when many hotels across Australia introduced credit card surcharges for paying their bills - which is unreasonable given that it is often the ONLY way to pay for a hotel (given the practicalities of carrying thousands in cash, and EFTPOS transaction limits). This caused me to keep moving my business away from hotels which charged this until I ran out of options :(.

Remember it is the credit card companies that are charging the fees, not the businesses. The businesses are just passing on those fees. If they didn't charge them, then people who pay by cash/cheque/eftpos , will actually be subsidising those that pay by credit card. Many companies have charged more for credit card transactions for years, they did it by giving a discounted price for cash, so thisis really nothing new. Those companies that don't charge extra usually have higher margins (make larger profits off the cusomter) so they can absorb those fees, so you are often paying more anyway. There is no such thing as a free lunch when it comes to credit card use.

PenultimateHop

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#290426 15-Jan-2010 21:48

robbyp: Remember it is the credit card companies that are charging the fees, not the businesses. The businesses are just passing on those fees. If they didn't charge them, then people who pay by cash/cheque/eftpos , will actually be subsidising those that pay by credit card. Many companies have charged more for credit card transactions for years, they did it by giving a discounted price for cash, so thisis really nothing new. Those companies that don't charge extra usually have higher margins (make larger profits off the cusomter) so they can absorb those fees, so you are often paying more anyway. There is no such thing as a free lunch when it comes to credit card use.

To me, it is a cost of doing business. EFTPOS isn't free to the merchant either, and cash handling (or cheque handling) is expensive as well - yet those don't seem to have costs passed on. Equally, I don't pass on my electricity price rises to customers.

Obviously it's up to the individual merchant and they are now within their legal or contractual rights to do this, but I know that I will be voting with feet (where possible).

drajk

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#290427 15-Jan-2010 21:49

robbyp:
Remember it is the credit card companies that are charging the fees, not the businesses. The businesses are just passing on those fees. If they didn't charge them, then people who pay by cash/cheque/eftpos , will actually be subsidising those that pay by credit card. Many companies have charged more for credit card transactions for years, they did it by giving a discounted price for cash, so thisis really nothing new. Those companies that don't charge extra usually have higher margins (make larger profits off the cusomter) so they can absorb those fees, so you are often paying more anyway. There is no such thing as a free lunch when it comes to credit card use.

robbyp, I have to disagree with you here - I don't know whether you have a business but if you do and bank significant amounts of cash you will probably know that many of the banks also charge cash handling fees which can be quite significant. Eftpos transactions can also generate fees, although I believe in most cases these would be a small set amount rather than the percentage type fees involved in either cash handling or credit card use.

In my opinion businesses should view the relatively small credit card fees as a cost of business - they are now almost always <2.5%-3% and often <2%. Many seem to be using the ability to charge such fees to unnecessarily and unjustifiably charge customers/clients - the one I find most offensive is the 'convenience' fee which I have heard is charged by the NZ Police for payment of an infringement notice - if you receive a speeding ticket and the penalty is truly for discouragement rather than revenue-raising why should you have to pay an extra ?3% when paying by credit card - especially when it is an automated process and the administrative cost of processing such a payment must surely be greater if you were to send a cheque and someone has to manually process/bank it. In that particular case there is no 'cost of supply' or 'margin' to really be considered either.

Going back to the original comments cash also causes extra security costs for some businesses, extra cash pickups etc... . In most cases I believe that businesses who are being honest with respect to cash would prefer not to have significant cash transactions.

In essence there are many costs which must be factored into final prices for most businesses and your comment about people paying cash subsidising credit-card customers, while not necessarily correct in my opinion, also infers that there should be 'fairness' to each type of customer - I would have to ask you then whether you would support the banks charging higher fees to customers who cannot speak good English and spend longer at the teller etc... or whether a shop should charge such customers more because they take more time with the explanation of a product/contract etc.... - obviously this would not be considered fair in the majority of cases!

robbyp

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#290450 15-Jan-2010 23:49

drajk:
robbyp:
Remember it is the credit card companies that are charging the fees, not the businesses. The businesses are just passing on those fees. If they didn't charge them, then people who pay by cash/cheque/eftpos , will actually be subsidising those that pay by credit card. Many companies have charged more for credit card transactions for years, they did it by giving a discounted price for cash, so thisis really nothing new. Those companies that don't charge extra usually have higher margins (make larger profits off the cusomter) so they can absorb those fees, so you are often paying more anyway. There is no such thing as a free lunch when it comes to credit card use.

robbyp, I have to disagree with you here - I don't know whether you have a business but if you do and bank significant amounts of cash you will probably know that many of the banks also charge cash handling fees which can be quite significant. Eftpos transactions can also generate fees, although I believe in most cases these would be a small set amount rather than the percentage type fees involved in either cash handling or credit card use.

In my opinion businesses should view the relatively small credit card fees as a cost of business - they are now almost always <2.5%-3% and often <2%. Many seem to be using the ability to charge such fees to unnecessarily and unjustifiably charge customers/clients - the one I find most offensive is the 'convenience' fee which I have heard is charged by the NZ Police for payment of an infringement notice - if you receive a speeding ticket and the penalty is truly for discouragement rather than revenue-raising why should you have to pay an extra ?3% when paying by credit card - especially when it is an automated process and the administrative cost of processing such a payment must surely be greater if you were to send a cheque and someone has to manually process/bank it. In that particular case there is no 'cost of supply' or 'margin' to really be considered either.

Going back to the original comments cash also causes extra security costs for some businesses, extra cash pickups etc... . In most cases I believe that businesses who are being honest with respect to cash would prefer not to have significant cash transactions.

In essence there are many costs which must be factored into final prices for most businesses and your comment about people paying cash subsidising credit-card customers, while not necessarily correct in my opinion, also infers that there should be 'fairness' to each type of customer - I would have to ask you then whether you would support the banks charging higher fees to customers who cannot speak good English and spend longer at the teller etc... or whether a shop should charge such customers more because they take more time with the explanation of a product/contract etc.... - obviously this would not be considered fair in the majority of cases!

I think it is largely due to margins. If the retailer is only making a 5% margin on the product, such as can happen with computer shops, then they obviously can't afford not to pass it on. I don't know of banks that charge cash handling fees to small businesses, but those that do along with eftpos wouldn't be charged as a percentage, it would be a fixed fee per transaction. Most NZ businesses are small businesses with many run from home so those are often businesses that either don't accept credit card or will charge a discount for cash. Personally with my business I find credit card more trouble than they are worth due to fraud and the extra admin it causes, and it does cut into the profit and I don't charge extra for those transactions. I have only been accepting credit cards for a year, but considering going back to only accepting payment by direct credit and cheque, as it has actually cost my business based on my previous years profits, when I didn't accept them.

sbiddle

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#290472 16-Jan-2010 08:33

JimmyLizar: Background on topic here

It mentions in the article that the surcharge can only be to cover costs and not to increase revenue.

Our local pizza shop, which enjoys a monopoly (as there is only one pizza shop in town) has recently introduced a 5% surcharge.

I believe that this is too much.

I could vote with my feet but that would mean no pizza, and that IS NOT an option, so I pay via eftpos.

Anyone know what is considered a reasonable surcharge?

5% is certainly higher than the merchant costs they will be paying.

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sleepy

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#290486 16-Jan-2010 10:29

This is like my old favourite the cheque handling fee that retailers used to charge, always used to make me leave where possible. It is interesting some off you have mentioned cash discounts as opposed to cc
as a large scale retailer with my own store i am used to people looking for cash discounts but they see there cc as cash, the days of actual cash are long gone. Our average sale is over a $1000 and as such only pay just over 1% fees it is a cost of doing business and only really hurts when i see the bill at the end of the month. What it does mean is we hardly go to the bank so less time out of work and if we do get too much cash we have to split it over 2 days to avoid cash handling fees, must be really hard to count a stack of $100 notes. Have noticed a increasing amount of customers offering to Direct Credit which is great i like money entering my account with the least effort.

I dont agree with stores adding on for cc charges (or public holidays) though there have been a few online stores doing it for a while. Personally we try not to take amex because of there high charges and find most users have another card and are used to being turned down.

if i was a dairy and selling small items with low margin i would still wonder about the time spent adding a % on and discussing why with the customer as opposed to the time spent with the next customer.
Customers are not in your store for your conveniance but theirs.

When trying to calculate what it cost someone to take your card remeber to add gst to the total.
This seems like an other useless piece of legislation that yet again hurts the consumer and retailer and the credit card company cant see who benefited apart from the team in wellington that got paid to create it.

All Stores want happy customers why put obsticles in there way.

Kyanar

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#290553 16-Jan-2010 16:42

Actually sleepy, there was no law change. The commerce commission threatened to prosecute Visa and Mastercard for price fixing, and this was the issuers way out of it.

Anyway, I reckon it is fracking stupid. There has not been a single instance of a retailer charging lower prices to non-credit customers, and tons of instances of higher prices being passed onto credit card customers. I.e, the retailers are using it as a pure profit avenue, because they sure aren't using it to recoup costs.

And the Commerce Commission insists that this will be great for consumers. If this is what the Commerce Commission considers sticking up for the consumer, I'd hate to see what would happen if they were sticking up for the retailer.

sbiddle

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#290569 16-Jan-2010 17:56

Kyanar:
Anyway, I reckon it is fracking stupid. There has not been a single instance of a retailer charging lower prices to non-credit customers, and tons of instances of higher prices being passed onto credit card customers. I.e, the retailers are using it as a pure profit avenue, because they sure aren't using it to recoup costs.

There have been planty of example of this over the years. Many computer stores, online retailers and bricks and mortar retailers along the lines of LV Martin for example have always advertised their prices "reflect a discount for cash" and have charged extra for credit cards for years.

fallen

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#290577 16-Jan-2010 18:23

sleepy: This is like my old favourite the cheque handling fee that retailers used to charge, always used to make me leave where possible. It is interesting some off you have mentioned cash discounts as opposed to cc
as a large scale retailer with my own store i am used to people looking for cash discounts but they see there cc as cash, the days of actual cash are long gone. Our average sale is over a $1000 and as such only pay just over 1% fees it is a cost of doing business and only really hurts when i see the bill at the end of the month. What it does mean is we hardly go to the bank so less time out of work and if we do get too much cash we have to split it over 2 days to avoid cash handling fees, must be really hard to count a stack of $100 notes. Have noticed a increasing amount of customers offering to Direct Credit which is great i like money entering my account with the least effort.

I dont agree with stores adding on for cc charges (or public holidays) though there have been a few online stores doing it for a while. Personally we try not to take amex because of there high charges and find most users have another card and are used to being turned down.

if i was a dairy and selling small items with low margin i would still wonder about the time spent adding a % on and discussing why with the customer as opposed to the time spent with the next customer.
Customers are not in your store for your conveniance but theirs.

When trying to calculate what it cost someone to take your card remeber to add gst to the total.
This seems like an other useless piece of legislation that yet again hurts the consumer and retailer and the credit card company cant see who benefited apart from the team in wellington that got paid to create it.

All Stores want happy customers why put obsticles in there way.

Well said, at the end of the day the customers can vote with their feet and not go to the shops/stores that charge a surcharge for paying with credit card, I certainly wont be giving any business to shops that insist on charging a surcharge.

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JimmyLizar

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#290580 16-Jan-2010 18:27

fallen: I certainly wont be giving any business to shops that insist on charging a surcharge.

Easier said than done when there is only one pizza shop in town and you LOVE pizza!

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Kyanar

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#290592 16-Jan-2010 19:12

sbiddle: There have been planty of example of this over the years. Many computer stores, online retailers and bricks and mortar retailers along the lines of LV Martin for example have always advertised their prices "reflect a discount for cash" and have charged extra for credit cards for years.

I believe I may have misspoke. My statement was intended to refer to the fact that since the rule change, no stores that did not already discount cash payments have decreased their prices for cash customers - they've all increased their prices for credit customers.

In other words, this rule change has not benefited consumers one bloody iota. The commerce commission has done nothing more than open yet another profit avenue for greedy merchants.

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#290598 16-Jan-2010 19:50

Exactly, Kyanar.

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sbiddle

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#290621 16-Jan-2010 21:59

Kyanar: In other words, this rule change has not benefited consumers one bloody iota. The commerce commission has done nothing more than open yet another profit avenue for greedy merchants.

Do you even know why the Commerce Commission took the action they did? And on what grounds the prosecution was for? Based upon a few of the comments from people in here I don't think many people have actually read either the Commerce Commison submissions, or their ruling.

The credit card companies were involved in price fixing. Their business models broke anti competitive trade regulations They were convicted under sections 27 and 30 of the commerce act and agreed to pay the commission money. It was nothing to do with a law change to let retailers add surcharges, this was simply a by product of the agreement reached by the parties involved.

If price fixing was occuring in another industry there would be people jumping up and down complaining about it. The changes were designed to force public disclosure of the interchange rates, that is a good thing.

allstarnz

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#290630 16-Jan-2010 22:36

fit the charges into your business models, it's not that hard is it. Same goes with that surcharge bollocks that comes in on public holidays. It's only a few days in the year, work it into your costs and it shouldn't be an issue.

As for cheque fees. I think it was fee charged by companies like Telecheck. About 10 years ago, it was something low like 25c, and wasn't pocketed by the retailer. Twas a fair charge IMO, especially with cheque fraud being quite common.

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