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Excessive credit card surcharges banned from today under new laws

5 September 2016

The ban on excessive credit card surcharges commences today 1st September 2016

From today large companies that charge consumers excessive credit card fees will be hit with fines of up to $1.1 million, small businesses have a year to comply to this new law. 

Australian Competition and Consumer Commission (ACCC) chairman Rod Sims said companies "won't be able to charge whatever they like" depending on how you pay for a bill.

Under the new law, most businesses must charge in the region of 0.5% for debit card purchases, 1 to 1.5% for credit cards, and 2 to 3% for American Express card purchases. These charges are intended to reflect what it roughly costs the merchant to complete the aforementioned transactions.

For the first year the law only applies to large companies who meet at least two of the following criteria: a gross revenue of $25 million or more, assets worth at least $12.5 million or with 50 or more employees. It will apply to all businesses from 1st September 2017, regardless of their size.

"This is really irritating for consumers, they go right through a transaction be it booking a flight, booking a theatre ticket, booking the footy finals, and only at the end do they find they're subject to another charge." Added Mr. Sims

 

Airlines introduce percentage-based fee

Airlines have been among the companies most criticised for the credit card surcharge fees they levy on any purchase made with a card, particulary through their online booking systems. Each of the major airlines have responded to this new law by switching how they calculate their card surcharge fees, from a fixed base fee, to a % based fee.

Qantas announced pricing changes in July that provided an example where a $100 domestic airfare, paid by a credit card, under the new laws, will now attract a surcharge of 1.3%, or $1.30, a significant reduction from the 7% surcharge that existed under its old regime.

Virgin Australia said this week it would switch from a flat $7.70 per person fee to a 1.3% credit card surcharge, and Jetstar Airways and Tigerair revealed their changes yesterday.

A Jetstar spokesman said its booking and service fees were being reduced from $8.50 (and $12.50 on international flights) to a 1.06% surcharge on credit cards, 0.75% for PayPal and 0.48% for debit cards. “The majority of Jetstar customers will pay less in fees than they currently do, and there will continue to be fee-free options for customers who prefer not to pay with a credit card,” he said.

A Tigerair spokeswoman said its $8.50 credit card fee would change to 1.33% for Visa transactions and 1.25% for MasterCard transactions. Lower surcharges apply to debit card transactions. “Tigerair will also introduce the payment method POLi from 1st September to continue to provide customers with a fee-free form of payment,” the spokeswoman said.

Tigerair said it will also introduce percentage-based fees for payment made by credit and debit cards. Payments with Debit MasterCard will attract a surcharge of 0.86% and Visa Debit cards will add 0.88% of the total transaction value. Bookings using a MasterCard credit card will cost an extra 1.25%, while Visa credit cards will attract a surcharge of 1.3%. Tigerair said POLi will be a fee-free form of payment.

 

Ticket Booking Agencies set to abolish Credit Card surcharge fees.

Both Ticketmaster and Ticketek customers will welcome the laws as both these agencies are set to abolish the card surcharges they have applied to ticket purchases. A Ticketmaster spokeswoman said that from today, ticket prices “will be the same irrespective of whether they pay by cash or use a debit or credit card”.

Consumers who believe they have been charged an excessive surcharge can contact the ACCC via its website. 

BPAY, PayPal, Diners Club cards, cash, cheques and American Express cards issued directly by American Express aren’t covered by the new rules. 

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