An Inquiry Into Excessive Credit Card Surcharges

It is common knowledge that people can’t live without their plastics. The CEO magnate and the overworked waitress share something in common, which is both rely heavily on credit cards. Banks and credit card issuers know this and could, in fact, take advantage of this. It is, therefore, a welcome relief that the New South Wales government is looking into the surcharges imposed on some credit cards.

According to one research, airlines and taxis lead the lot in their charges reaching as high as ten percent. To be more particular, both Qantas and Tiger airways in 2009, were found to be charging their passengers with a surcharge of $7.70 each. In truth, the actual cost to the airline in processing credit card transactions is only 1 percent. Nonetheless, Qantas claims that it hardly benefited from such surcharges.

It is the corporations or entities that dominate the market such as the airlines and taxis that apply such inflated charges on credit card purchases. The Reserve Bank in 2003 allowed such fees to be introduced in an attempt to allow these companies to recover the cost they incur in processing credit card transactions. This was the result of the Reserve Bank’s abolishing the “no surcharge rule” and allowed the “fee for service” on consumers.

The surcharge was meant to promote a health competition among the various merchants and ultimately lessen the costs associated with credit card use. However, the unintentional effect to this wisdom is that those companies yielding high market influence were allowed to impose ten percent charges on their credit card consumers.

Early this month, the NSW government has initiated a research project that will investigate on the excessive credit card surcharges. If its suspicion is affirmed, it aims to remove these fees once and for all.

It is true that businesses need to be given the chance to have their costs covered. However, it is not reasonable for them to pass it on to the consumers just because they rely on their plastics. This was the opinion of a trading minister, Virginia Judge, when speaking to the Daily Telegraph.

It is actually the sole responsibility of the Reserve Bank of Australia to regulate the Australian payments system covering credit, debit and EFTPOS cards. Once the findings are disclosed, the NSW government will use it to put pressure on the RBA as well as the Federal Government so that a more reasonable and just surcharge system may be worked out.

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