Credit Card surcharges are becoming more popular

For those with discipline, putting purchases on a credit card with 55 days interest free makes good financial sense. But have you recently booked a flight or made some other credit card purchase and noticed the credit card surcharge that the merchant has charged you? These surcharges are becoming more prevalent and are due to the reforms to the credit card system brought upon by the Reserve Bank.

You see, every time you use your credit card, banks charge the retailer a percentage of the purchase price. Usually this is around 3%. On top of this, the banks charge each other fees as they pass the money along the banking system. These fees are also passed on to the retailers. In the past, retailers were not allowed to recoup these fees by applying a surcharge to credit card purchases.

In 2003, the Reserve Bank began a series of reforms aimed at reducing the size of these fees. In the past the fees were factored into the cost of everything you bought. In effect, those paying cash for items were subsidising those using their credit cards for the same items. From January 2003, the RBA removed rules that prevented merchants from passing the cost of their fees on to customers that use credit cards. This was done by allowing retailers to add a surcharge to credit card payments.

So next time you make a credit card purchase be sure to check whether the retailer applies a surcharge and ask yourself whether it might be a better option to pay cash or use Eftpos. For more information on finding the best credit card for you go to our credit card section and try our credit card comparison tool.

Published on September 9-st, 2007 in Credit Cards
Damon Rasheed is the CEO of Rate Detective, an Australian financial service comparison sites specialising in Life Insurance, Income Protection Insurance and home loans. Damon holds a Master's Degree in Economics from the University of Melbourne and has been involved in many start-up internet businesses.