Credit card surcharges - are they justified?
On March 18 something will happen in Australia that may be a good idea to copy here - retailers will be allowed to use credit card surcharges only to recoup the costs of accepting the card.
OPINION: Back in 2003, the Reserve Bank of Australia prevented credit card companies from forbidding surcharging by merchants.
Retailers (or merchants as those accepting cards are called) felt aggrieved that they were paying high merchant fees to the card schemes, and some felt the cardholders should pay to have their cards accepted. Otherwise, retailers argued, the cost of accepting the cards forced them to recoup the fees by charging higher prices, so non-credit card-paying customers were being penalised.
The argument scans well, but of course, fails to mention that there is also a cost to other forms of payment such as handling cash, and is in effect, just another business input.
I mean, you wouldn't expect customers who buy something in winter to have to pay more because heating a shop costs more in winter, would you?
Ignoring the rights and wrongs of the "to surcharge or not to surcharge" argument, the results of the RBA's 2003 move was to see some retailers horribly exploiting the ability to surcharge.
Instead of recouping the costs of accepting a card, some retailers, notably those who had customers over a barrel (such as airlines and entertainment venues) found the RBA had gifted them a new profit centre.
Credit card companies said it would happen, but no-one listened. Credit card companies were not flavour of the month as they were seen as having used their oligopoly power on merchants.
By 2011, though, the RBA had worked out what was happening, and decided regulation was the answer.
Well, the same appears to be happening here, and the Commerce Commission is investigating again, though it is approaching the issue from the point of view of the Fair Trading Act. In other words, is Air New Zealand leading customers to think it is recouping the costs of accepting credit cards?
Is regulation the answer? There's a gut feeling that the answer is yes, but income streams taken away from businesses with one regulation just add extra costs elsewhere. Does anyone really believe that the loan laws requiring that fees be "reasonable" has resulted in lower costs for borrowers?
Perhaps the credit card surcharges are not gouging. Perhaps flights and concert tickets and car parking would be that bit more expensive if the surcharges were not in place.
Perhaps the new Aussie regulation will just lead to a pricing reshuffle in businesses, instead of an overall fairer price.
There is an argument that people should not wait for regulators to do something, but for New Zealanders to deluge those employing surcharges with complaints. I walked out of a dairy the other day when a calculator was whipped out to calculate my credit card surcharge.
We are entirely capable of using social media to make celebrities' lives more miserable. Why not use it to shame airlines? Go on.
Every time you are forced to pay a surcharge, send an email of complaint asking the business to justify it.
Send the complaint and response to people like me. Tweet it. Facebook it. Set up a web-page.
We as consumers are faced with some bewildering pricing tactics from businesses, and we are a bit passive about it. Businesses use complexity in pricing for a reason.
Pricing should be transparent. We have too long a history of allowing businesses to get away with complexity, and indeed, our passivity has encouraged them to do it.
When faced with something that angers you, make a point of taking it up with the business.
It forces them to deal with complaints and in a public forum that has the potential to bring about change.
In a democracy a country gets the government it deserves.
In a free market, the same could be said of its retailers.
NEW ZEALAND SURCHARGING
Most shops do not levy credit card surcharges, and many online retailers, such as Fishpond, also choose not to. It is typically found in online purchases where the other payment options are limited, or nonexistent.
Some businesses do genuinely appear to be recouping costs. It is hard to see a logic with others. Air New Zealand charges $4 per person per one-way journey for domestic New Zealand fares, $6 per person per one-way journey for short haul Tasman and Pacific Island fares, $12 per person per one-way journey to Bali, $17.50 per person per one-way journey for long haul International fares, including Tahiti.
Wilson car parks: 50 cent charge on each payment. Ticketek: The surcharge is 2.25 per cent and "includes credit card fees and expenses, handling and associated infrastructure costs".
- Sunday Star Times