Retailers warned to keep surcharges down under new credit card reforms

By Claire Reilly

Retailers across the country are being reminded to monitor card transactions in their stores, with new rules coming into place today controlling the amount retailers can charge for credit and debit card transactions.

The enforcement of these new rules follows a lengthy review process by the Reserve Bank of Australia, which assessed the prices that retailers were charging consumers for using a debit or credit card to pay in stores.

In a statement released in June 2012, the RBA conceded that a review had been necessary as some retailers were passing on fees that exceeded the costs of maintaining their card payment facilities.

“In recent years…some surcharging practices that potentially distort price signals — such as surcharging in excess of card acceptance costs — have become more widespread,” the RBA said.

In light of this, the RBA introduced reforms to limit card surcharges so that they were no more than retailers’ “reasonable cost of acceptance” — that is, costs involved with processing payments, maintaining card payment facilities or training staff on how to use these facilities.

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Visa is claiming the new reforms as a win for consumers, highlighting that its merchant fees are “less than half the average cost of American Express and Diners Club” and going to lengths to differentiate itself from these card companies.

“Retailers will need to review their surcharging practices to make sure their surcharges are not excessive and that they are clearly disclosed upfront to customers, both in-store and online,” said Visa’s Country Manager for Australia, Vipin Kalra.

“Visa is a lower-cost card, so we would expect retailers to take that into consideration in their surcharging rates,” he said.

“We hope retailers that surcharge will consider the customer experience.  Retailers benefit from a global cardholder base, access to new sales channels and a guaranteed, fast, efficient and secure payment experience when consumers choose to pay with a card, so we hope they take these factors into consideration in their surcharging decisions.”

Reiterating the importance of the reforms, the Australian Retailers Association said retailers were not permitted to take the highest Merchant Service Fee (MSF) from a particular card provider and apply it across the board.

“For instance, if the MSF for AMEX is 2.5 per cent and the MSF for Visa is 1 per cent, you must charge a different surcharge for the two transaction types,” said an ARA spokesperson.

The ARA also confirmed that AMEX, MasterCard, Diners and JCB “have not made any decision to participate in the surcharging limiting” as yet.

Visa has released a fact sheet for retailers with information on the new reforms which can be found here. Full details on the RBA’s final reforms and the changes to the surcharging standards can be found here.

A graph from the Reserve Bank of Australia showing the average merchant service fees charged to large and small retailers (pink and red respectively), compared with the average surcharges that retailers were passing on to consumers (blue and purple).

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