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June 08, 2011

  • News:  RBA Contemplates Surcharge Cap 

    Australians are paying excessive fees when using their credit card for online purchases according to a recent announcement by the Reserve Bank of Australia (RBA). Analysis conducted by RBA indicates that over 40 percent of larger online merchants charge an added fee for credit card payment compared to only 25 percent of smaller online retailers. Although merchants are not violating a 2003 rule that allows them to charge an extra fee for card payment, RBA feels these fees have grown to excess. Therefore, the RBA is considering a cap on the surcharges for credit card purchases that would only be specific to any additional cost to the merchant in processing the payment. Because merchants would often build the cost of card payment transaction fees into the price of goods, the 2003 ruling allowing the surcharge was made to stop the practice that also passed the fees onto cash customers.

    Additional evaluation in 2010 by the RBA showed that 18 percent of all online merchants charged a surcharge for credit card purchases compared to only 4 percent in person transactions. Furthermore, additional analysis revealed that online merchants tend to charge a higher surcharge than in present merchants. The average online surcharge was 4 percent compared to 2 percent for card present transactions. RBA speculated that the reason online merchants were able to force the surcharge onto customers is because there are limitations to payment unlike in person transactions where customers have a number of choices including debit card, credit card, and cash.

    Consumer advocate groups have voiced a number of concerns that merchants are increasingly raising the amount of the fee assessed on credit card purchases far above the transaction fee they pay to card networks. According to their data, RBA shows the average additional fee charged by merchants is 2.5 percent whereas the average transaction fee ranges between 1.5 percent and 2 percent depending on the size and volume of the merchant. The RBA has requested input from merchants, card companies, consumer groups, and other interested parties for review prior to deciding the fate of surcharge fees.

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