Retail start-ups could be forced to display credit card fees following a new report that reveals sharp increases in surcharges for credit card usage.
A report by consumer group Choice, commissioned by the NSW government, found 20% of smaller retailers and 40% of larger businesses surcharge their customers.
Based on a survey of 1,435 consumers and 140 members, Choice says 68% of respondents do not believe retailers and other businesses should be allowed to surcharge for credit card transactions.
While the intention of allowing a surcharge was to encourage competition and lower the cost of using credit cards, it has led to some businesses charging excessive fees of up to 10%.
Choice spokesman Christopher Zinn says transparent surcharges at reasonable levels, typically 1% for most cards, should suffice.
“We are concerned by excessive charges that are often not apparent until after you’ve paid, making it too late to use an alternative fee-free method,” he says.
Credit card company Visa welcomes the report, saying it shows some retailers are surcharging in a bid to boost their own profits.
According to Chris Clark, Visa general manager for Australia and New Zealand, the surcharge should reflect no more than the merchant’s reasonable cost of acceptance for the card used.
Clark says blended surcharging, whereby business apply the same average surcharge to both higher and lower cost cards, should be banned.
But the Australian Retailers Association says it supports the individual right of retailers to apply surcharges for credit card purchases.
ARA executive director Russell Zimmerman says the Reserve Bank allows retailers to directly charge their customers for the cost of accepting credit card transactions, but many retailers still opt against it.
“Good retailers understand that they must consider their customers’ experience when deciding whether or not to directly charge for credit card usage and the majority won’t overcharge or charge at all,” Zimmerman says.
“Businesses who charge directly for credit card use must inform their customers that the credit card fee will apply and also disclose the amount as a dollar or a percentage before they enter into the transaction.”
“At the end of the day, retailing is driven by consumer demand and if charges for using credit cards are deemed unacceptable by consumers, this will affect the individual retailer’s bottom line.”