Editorial: More worries on credit cards

OPINION: The bank workers' union, Finsec, has called on the Government to toughen its oversight of Australian-owned banks in this country because of the hefty dividends they paid to their parent companies last year. According to Finsec, the banks reported combined profits of $790 million but paid out more than $1.7 billion in dividends. Not bad, when the economy was in a recession.

But at least our banks did not go belly up, the fate of many bigger banks in Europe and the US and the cause of the international financial crisis that exacerbated the recession's impact. They avoided this embarrassment as the economy slowed by making staff redundant, sending jobs offshore, stepping up the pace of mortgagee sales, freezing some staff's wages, and closing branches.

Finsec spokesman Andrew Campbell accordingly is appealing for tougher regulation of the banks to include social responsibility and national interest measures to stop overseas shareholders being given preference over the local economy and staff. The snag is that this would discourage the overseas investment on which our economy has become reliant because New Zealand is heavily indebted.

Building up this debt is helped by the ease with which we can use credit cards. But consumers are cavilling as retailers introduce a new surcharge. BP Te Rapa instituted the charge from the start of the month, making it one of the first businesses in the country to pass credit card costs on to its customers.

The banks clip the ticket at both ends of a credit card transaction, charging hefty interest on card users while imposing significant (and fast-rising) fees on retailers for accepting credit card payments. Arrangements between the credit card companies until recently prevented retailers from passing on these costs. The Commerce Commission stepped in late last year to make matters more transparent. The new charges are the consequence.

Visa NZ spokesman Sean Preston says retailers who have introduced these surcharges are unfairly shifting the cost to customers who chose to use a credit card. But otherwise aren't customers who don't buy on creditsharing the cost with those who do?

Mr Preston complains that the charge can limit a consumers' choice of payment. Not so. It simply means consumers must brace to pay more when they take the credit-card option. He also says some customers will shop elsewhere. But the risk of losing customers is a business decision for retailers to make.

The Commerce Commission says it is taking a close interest in the surcharges and will continue to monitor developments. So it should. Some surcharges being reported in the media sound far from fair and reasonable. The practice of surprising customers with the surcharge at the check-out is far from fair and reasonable, too. Customers are entitled to know of the impost before they buy, so they can exercise their right to shop elsewhere. If this all turns people off expensive credit card use, it might be a good thing.

- © Fairfax NZ News