Bigger bite on the cards

By MARK FRYER

Picture the scene: you've just finished a romantic meal overlooking Sydney harbour, you hand over your credit card and the receipt comes back with $5 added on. "What's that?" you ask. "Credit card surcharge," replies the waiter.

Can they do that? They can. Since the start of this year Australian businesses have been free to charge extra when customers pay by credit or debit card.

In theory, the surcharge is meant to recoup the costs that businesses incur when they accept cards, although there's no limit to the amount they can charge.

Given the thousands of New Zealanders who cross the Tasman for a quick break, some Kiwi travellers may find the surcharge adding a slightly sour taste to their holiday experience.

But don't drag out the Ned Kelly jokes just yet; the Australian Consumers' Association says that so far very few businesses appear to be taking advantage of their new-found right to charge extra for card users.

The organisation's finance policy officer, Catherine Wolthuizen, says it's likely that competition and the desire not to upset customers mean that many businesses won't do so. With one exception, those that do add a surcharge tend to be small companies, she says.

Visa International says that while surcharging is not yet widespread, the practice is growing.

A survey of 1000 consumers carried out for the credit card company found one in 10 people had been surcharged, and half said they had not been warned about the charge.

Visa says most companies which add the surcharge are relatively small - places such as petrol stations, car-repair shops and hairdressers, for example.

The one big business which has taken advantage of this new opportunity to lift its charges is Qantas, which this month added a 1 per cent fee to the cost of tickets bought in Australia and paid for by credit card.

That includes tickets bought through its Australian website.

Despite criticism that it isn't reducing costs for buyers who do not use a credit card, and claims that it is not properly disclosing the extra cost, Qantas said the charge was "here to stay".

The governor of the Reserve Bank of Australia, Ian Macfarlane, said last month that there were signs that Australians were using their credit cards less, a change he attributed in part to the arrival of surcharges.

All of this is a bit foreign to New Zealanders, who are thoroughly accustomed to whipping out the plastic without giving any thought to idea that they might have to pay for the privilege.

The surcharge results from changes to the rules surrounding credit card payments, instigated by the Reserve Bank of Australia. It has banned the card companies' "no surcharge" rule, arguing that it meant shoppers who pay by cash or cheque were effectively subsidising those who chose to use credit cards.

Under the old system, businesses paid a percentage of each credit card transaction to the card companies, but were prevented from passing those costs on to credit card shoppers.

Despite bitter opposition from the banks and the card companies, the reforms now allow businesses to decide how they want to charge - one price for everyone, or more for those who use their cards.

Debit card companies have also agreed not to apply a "no surcharge" rule.

In theory at least, consumers should be compensated by another change introduced by the Reserve Bank, which will cut the fees which banks charge businesses for handling credit card payments. However, there's nothing - apart from good old competitive pressure - to prevent businesses from pocketing the gains from lower bank charges while still adding on a surcharge.

Nor is there anything to stop businesses having a range of fees, with different charges for different cards.

What to do? If you're worried, ask. By law, businesses are meant to tell you whether they apply a credit card surcharge, and how big it is, but if there's any doubt then it's easier to ask first.

If there is a surcharge, your only options are to pay by cash or eftpos, or take your business elsewhere.

And don't believe anyone who says they must charge extra for credit cards; the surcharge is entirely optional.

Visa has has been particularly active in fighting the change, offering businesses signs declaring that they don't add a surcharge and running advertisements asking shoppers to be on the lookout for retailers who abuse the new rules on credit card transactions

Visa and MasterCard have also taken legal action against the changes, and a court decision is expected this year.

* To contact Personal Finance Editor Mark Fryer write to: Weekend Herald, PO Box 32, Auckland. Email:Mark Fryer. Ph: (09) 373-6400 ext 8833. Fax: (09) 373-6423.