Australian’s are losing a few hundred million dollars a year in surcharges, according to illustrative figuring based on research by the Reserve Bank of Australia. Researching online shows that there are few retailers such as David Jones and Myer that do not charge their customers a surcharge in store. But most retailers do charge you a surcharge using something like American Express but a good way to avoid the extra fee is by using cash or a debit card.
Currently, it’s so easy and convenient to swipe a card or tap and go rather than go to the ATM to withdraw cash before shopping causes many Australians to spend a lot more money than if they went in with cash. Going in with cash can cause you to look at your purchases and see if you truly want or need the items.
Consumer psychologist Adam Ferrier says that people go to the shops with banknotes are less likely to spend than if they take their card. “Our brains are wired to think as little as possible about things. The brain accounts for 2 per cent of body weight but 20 per cent of energy usage. If something is easier to go along with, we will go along with it,” he said.
Wondering How Much Extra You Could Be Paying by Using a Card?
After a crackdown by the Australian Competition and Consumer Commission, businesses are now only allowed to surcharge customers the exact fee it costs them to run the card. You could pay 1 per cent of the value of your transaction but if a merchant is charging a flat fee for every card payment, it could be up to 3 per cent and it’s time to question them. It’s important to contact the ACCC if you feel you are being overcharged as they have been receiving thousands of complaints.
Currently, according to RBA, the average costs of transactions to merchants are Eftpos debit at 0.25 per cent, Visa and Mastercard debit at 0.55 per cent, Visa and Mastercard credit at 0.8 per cent, American Express at 1.41 per cent and Diners Club at 1.79 per cent.
According to the RBA’s 2016 consumer payments survey, Australians are three and a half times more likely to pay surcharges online shopping and by using over-the-phone payments than if they paid for something inside a store. The survey also found that a surcharge was paid on about 9 per cent of online and phone payments, compared to 2.5 per cent of in-person card payments.
What is the Economic Role of Payment Surcharges?
RBA states, “Businesses may choose to charge customers an additional fee or surcharge to recover their cost of accepting electronic payments. When a business accepts an electronic payment they are typically charged fees by their bank for processing that payment (which is known as ‘merchant fees’). These fees are typically higher for credit cards than debit cards.
Since there are a number of card systems operating in Australia, there are significant differences in the costs to merchants that accept payment through these systems.
Smaller businesses pay higher merchant fees than businesses with larger annual card transaction values. The size isn’t the only factor, the type of card used by the customer is another.
According to RBA, larger merchants, such as airlines and hotels face higher card acceptance costs because they receive a larger share of payments using certain types of credit cards, such as corporate cards and ‘premium’ consumer cards, which have higher merchant fees.
Why Are Surcharges Allowed?
There is a cost to every transaction, some more than others. RBA data suggest that merchants pay around $4 billion in service fees to banks and card issuers a year, so they are allowed to recover those fees from the customer.
In a speech in 2018, Reserve Bank Governor Phillip Lowe said, “As we move to a predominately electronic world, over time the cost of electronic payments will decline.”
Can I Avoid Paying a Surcharge?
Yes, by using cash or debit, depending on the retailer as they are supposed to disclose that a surcharge will be added to the transaction at checkout.
When online shopping or paying a bill, always look for the BPAY option to avoid surcharge fees.
Philippa Hunt is a Woman on a Mission.
WiseGirls Money Academy was created after working as a qualified Financial Adviser for many years and deciding it was time to assist women who desired to learn and develop the self-empowerment to understand their emotional relationship with money, the skills and knowledge to save and invest. They wanted to learn how to create their own financial future and become financially capable.
The WiseGirls Money Mission is to provide the opportunity and place for growth and development of women of all ages in personal and financial skills in a supported female environment so that they take control of their future to reach their own financial independence.
