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A way companies get away with excessive credit card surcharges

I received an email from ING Health Insurance and question the ethics of giving a 4% discount for direct debit. Isn’t that another way of adding an excessive credit card surcharge?

It means if i’m paying for the insurance on my credit card i’m paying an approximately 4% surcharge rather than a 0.5% to 1% surcharge which would be legal as it covers their costs.

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The discount doesn’t apply to BPay either (BPay is an ING Health Insurance Payment Option), so it can’t be called a credit card surcharge.

Some businesses are giving discounts for early/payment on time and on different payment methods. They will have business decisions why they do this.

In relation to credit card surcharges, the ACCC found

Credit cards usually have a higher cost for businesses, and may cost the business up to 1-1.5 per cent for Visa and MasterCard, and between 1.5-2 per cent

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It is an incentive to get you to have your monthly bill just happen and be paid. No need for the company to send out a bill each month. No opportunity for you to look at the bill each month and think why do you pay this mob this amount of money each month. It locks you in to the lazy mode of bill paying and for many companies that is worth a small discount. Direct debit applies to a bank account.

Now if you had an arrangement for an automatic monthly charge on a credit card, not only would you miss out on the direct debit discount of say 4%, but you would be hit with a credit card surcharge of whatever they deemed fit.

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Exactly. It is convenient for you and for them.

Emailed bills don’t get overlooked in cluttered Inboxes, or eaten as spam. Busy people don’t forget to pay the bill. Busy people don’t have to take time out from their day to initiate the payment.

Businesses don’t have to chase customers who may be innocently late in payment. They don’t have to send reminder / threatening emails/letters.

The downside can be dishonoured transactions (which, again, can be innocent).

Another downside is if you end up in a dispute with the supplier

a) you will have to chase them to get your money back
b) it may be difficult to cancel the direct debit

I am selective about which suppliers I have direct debit arrangements with and which I pay manually.

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It also reduces business following up customers when credit cards change (reissued) and not updated. I expect that this takes considerable time and effort…and many customers may be dubious about contact to update details thinking it is a scam.

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That is a problem for businesses. CC card numbers may not change, but expiry dates do every few years.
Bank accounts do not expire.

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The above points are excellent and often reflect the reality of direct debits.
I for one cannot fathom why Australia, like SOME jurisdictions only allow DD to be cancelled by the service provider.
There are other nations where the power to change or extinguish the DD always lies with the consumer.

I suppose this is just another example of Big Business wagging the banking dog’s tail.

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That is not completely correct. The process we have to follow is

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Sorry, I was unclear. I meant that some jurisdictions allow the customer to cancel the DD by telling his/her bank to cancel the DD and there is no requirement for the customer to communicate this fact with the service provider, which seems to be the case in AU.

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As others have noted, the discount is for being willing to have a direct debit from the types of accounts listed (which does not include credit cards from which direct debits are also possible).
So the extra cost to you of paying by credit card when billed, not via direct debit using an approved method, is 4% pus the credit card surcharge.
Even if the discount had been for paying with a non credit card method, I doubt that the ACCC would consider it a credit card surcharge. This is because when I queried with them a 3% discount being offered for paying by cash I was advised that a discount for paying with another method was not considered to be a credit card surcharge.

IMO it can also involve considerable time and effort for consumers when credit card details e.g expiry date and card verification value (CVV) change. This happened to me to me recently and since my card issuer was unable to provide me with of my direct debits it took quite a lot of work to find what they were and provide them with the new information.

I also found that a few businesses that i had direct debits with did send me an email alerting me the coming expiry of the card and the need to give them new info.

And one advised me that if the card number was not changing i did not need to do anything. I presume, but have yet to get confirmed, that it used the card updater service some cards offer to businesses.

Also, I decided (although not essential) it was desirable to change the card details held by businesses where I make occasions online purchases to avoid having to enter the new info when i next made a purchase.

Would be interested in the experiences of others when card expiry dates change.
Was much easier with my wife’s credit card issued by a bank. It sent her a list of the businesses that had direct debit arrangements with the card.

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Agreed. And the cost of late payment can be significant as well as potentially adversely affecting your credit rating.

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I would go further. I should be able to do the following.

I log in to internet banking.
It shows me a list of DDs.
I can click one, click Delete, click Confirm.
Job done.

Why isn’t it that easy?

No need to tell / write to / email the bank or the provider. However what the backend of the bank’s internet banking web site does is up to it.

That could also address the later point:

(I keep a list of places that have my credit card details. If it’s not a periodical debit, it may not matter whether I keep a place up to date however.)

I think credit card debiting may work differently from direct debit from a bank account however. So it may be correct that your bank cannot provide you with a list of organisations that are debiting your credit card periodically. You would just have to look through recent credit card statements.

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One reason is people could cancel a direct debit without ever telling the business or closing their account or even trying to close their account. Does the business report them for non-payment not knowing otherwise, or what happens?

It should be that easy to stop the DD, but it seems reasonable that the business needs to be advised of it as well as why, even if just to protect oneself from bad credit reports that are not warranted.

Westpac for one automtically provides one each time the card number gets changed.

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Yes. It was my expectation that any bank who added this to their internet banking web site would also have the backend provide the notification to the business.

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Then it would be more than a click because the reasons for stopping the DD could be many and should the bank be the one responsible for (eg) closing a customer’s account if that was the reason noting there is no contract between the business and bank save for the DD authorisation?

I agree with ‘click’ should stop the DD, but I also think a requirement for the consumer to tell the business is eminently reasonable.

As you say, that may be different. You may be cancelling the DD but not closing your account. If you want to close your account, you should have to tell the business. If the business only offers payment mechanisms that involve DD then you are probably going to have to contact the business to discuss, one way or another.

So if you cancel a DD then the business should be told by the bank exactly that you cancelled the DD (not more, not less) - so that the business does not continue to attempt to use it and result in dishonours. As you say, it is not the bank’s problem to deal with the wider issues of what you are doing with the business.

A business offering flexible payment methods might respond to the cancellation of a DD by starting to send bills. It may be as simple as that. No communication needed.

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Why you ask?

Because special interest groups have a lot more pull with politicians than you or I do.

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Having been seriously burned by a gym many years ago where it was impossible to cancel the DD, there is no way on earth I will willingly agree to ever have a DD again. The main issue is you end up giving access to an unknown person who can take an undefined amount from your account when they wish. Given your electricity bill say, will be different each billing period you have no idea how much is going to be taken. With the exception of DD to myself (other accounts at different financial institutions) I have just one DD and that was because I was forced to agree if I wanted the service. In this case, I always pay the bill by Bpay and have never actually allowed the company to activate the DD because the bill is paid.

And have you noticed it is getting more and more difficult to pay your bills in the manner you want? All businesses must offer a fee-free way to pay the bill but then make it very difficult for you to actually access that payment method much preferring you use the method that is most convenient for THEM!

In any case, I am a responsible adult who has never missed a bill for any reason in three countries over 55 years of living independently and fending for myself. I do not need some service provider or organisation managing my bank account thank you very much.

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I’ve just been on holiday in Brisbane and found several restaurants that offer a 5% discount for cash payments. The only ways to pay are cash, credit card, debit card or eftpos. If you aren’t paying with cash, there is no way to avoid the hefty “surcharge” on card payments which is far more than the cost associated with accepting that payment method.

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