Credit Cards - High Interest Rates/Surcharges

When bank deposit interest rates were above 15 per cent credit card rates were 22 per cent. Bank deposit interest now are below 4 per cent why are credit card rates still above 20 Per cent. Most of the people who are forced into paying credit card interest are struggling to keep their head above water financially Why does the government not force banks to drop credit card interest rates ?

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It is called legal theft.

Just one step above the disgusting bottom-feeding payday lenders.

Hi & welcome to the Forum. It would seem that Choice agrees with you.

Choice has written about this and other issues with our banks in: Our five-point plan for the banks to earn back trust during the COVID-19 crisis

Have you responded to Choice’s request to share your story at: CHOICE’s investigations team is looking into the human stories behind issues like unreasonably high interest rates on credit cards, financial hardship and problems people face with their banks.?

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Hello,
My first post so please excuse if its a duplicate.
Does anyone know the latest on excessive credit card surcharges? I know the ACCC weighed in at some point, but wondering if the matter is ongoing? Or closed?

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Some info on surcharges.

Pity nothing is done about the extortionate credit card interest rates.

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Welcome to the forum.

Are you talking about the surcharges businesses charge people for using their credit card, or the interest rates banks charge on credit cards?

If surcharges then: from the ACCC website: “The purpose of the ban is to stop businesses from charging payment surcharges that are excessive. That is, from charging a customer more than what it costs the business to process the payment.
A business is not required to impose a payment surcharge, but if it chooses to then it is only allowed to pass on to the customer the costs that the business was charged for accepting payment of that payment type.

If interest rates, then nothing has been done it would seem based on a search of the ACCC website,

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The surcharge has been allowed for a number of years now as a means to allow businesses to pass on the charge on them by credit card companies to the buyer.
It has to be reasonable though.

Up to 2% for Visa and Mastercard, and 4% for Amex would be reasonable.

However, as more buyers become aware of their ability to claim reversals on payments made using credit cards for goods and services that may become in dispute, it is an impost on businesses to defend. They may well factor this in to determine the surcharge for credit card payments.

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Time there was legislation to stop businesses adding transaction fee to a sales.
The cost should be incorporated into the sales prices like it is done with GST.
This habit of adding a significant and not universal percentage to goods is confusing. More pertinent as credit cards usage increases over cash.

As it is we often have two prices; one for “cash” (pay now) and one for “no interest” repayments over the next n months. Would it help the consumer to add more prices to separate folding money from cards? Not all card issuers charge the same rate to retailers so would we allow retailers to list different prices depending on which card you present? How many would be reasonable?

The similarity with GST is only very superficial as it applies to all goods at the same rate in all stores whereas card surcharges are variable under different circumstances.

I have a feeling this might make confusion worse not better for those who are not concentrating sufficiently to ask before they accept a deal what the all up price will be.

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Welcome to the Community @dakermw

I merged your post into this existing one, and there are other related topics such as

Many of us have a similar opinion that a business is free to designate how it will accept payment, and if that has an extra cost it should be part of their business costs not added on. A counterpoint is that cash customers would also be funding card fees even though they are not using cards or incurring the fees on the business.

What government has done is to enact what it believes is a ‘happy medium’ whereby actual costs can be recovered but not more. A cynic might think business has been (wink wink nudge nudge) encouraged to both add that cost of business into their prices as well as add it onto card sales. The problem is in the proof if that is being done case by case, business by business.

FWIW card fees are all but unheard of in the US, but from memory there are reports US prices are 5%+/- higher than they otherwise would be because of absorbing card fees. Neither way is fully transparent.

Our government has taken the position that competition should cause business to absorb or minimise fees. Whether it is working that way is arguable. Yet it is not a new topic, nor one that has a lot of traction since there are always ways to do ‘end runs’ To wit, Is an item for $10 w/no card fees a better deal than one at $9.75+1.85%? Many of us would prefer paying $10, all done, rather than potentially saving $0.07 by paying the fee. How does any company establish their price this way or that, and as for legislation to regulate it, how?

It seems a catch-22 where business is ‘the dealer’ either way.

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To add to the two previous posts, back in the days of the clunk/click paper card processing, I worked out the total cost to our business of providing credit card facilities: it was 5%! This was purely due to the abundance of fees the bank charged us.

I can’t remember all the fees but the first was for the privileged of being given a credit card facility; a monthly rental for the clunk/click machine; cost of pre-printed credit card stationery you had to have, including merchant reporting; and of course a percentage of every transaction. If any transaction failed for ANY reason, we were hit with an additional fee.

Digging deep into the dusty corners of my mind, I think we were charged 3% commission on each sale, and the remaining 2% was all the other costs to total the 5% of any credit card transaction.

Also, the higher your turnover the smaller the commission percentage taken. I seem to recall that the largest enterprises paid no commission or fees. So small merchants payed, and still pay, a highest percentage commission per transaction viz-a-viz larger enterprises. Ironically, the less you could afford to pay, the more you had to pay!

It follows that the costs (as a percentage) of sales will not be the same with small businesses paying a higher percentage of transactions, so they are be permitted to pass on more under the current legislation. The majors such as supermarkets only have relatively minor costs, so they often absorb the costs. There are of course industries that chose to maximise their earnings whenever they can so they will charge whatever credit card fees they can get away with.

If credit card costs were to be incorporated into the price, the credit transaction cost would need to be
standardised first. So should big business pay a higher percentage of their transactions to the banks to match what small businesses pay, or should small businesses pay less? Do you think the banks would voluntarily agree to drop their percentage rate commissions from small businesses? No chance.

So if standardisation went ahead as you have suggested, you would end up paying more for everything you purchase by credit card from all the larger (turnover-wise) enterprises. This would encompass all the majors, a lot of the stores you see in shopping centres, and a lot of the bigger online businesses.

Is that something you would want??

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We encountered a new arrogant cynicism. A trader maintains neither he nor his business have a surcharge, but when the surcharge on the transaction is questioned he replies it is the bank’s charge not his, reiterating he does not have one and any displeasure should be taken up with the bank.

Payments systems were supposed to become more efficient and transactional costs reduced, but instead they have risen across the board seemingly at a law of their own writing.

Why would that be the case? The posted price would be the comparison shopping price. If the shop next door posted $1 less many would go next door. Since the surcharge is only applied at the terminal that makes comparison shopping more opaque, especially when the buy is in the $100’s. How many consumers seek out the surcharge rates and compute the full price when comparison shopping as compared to only the ‘tag’ prices?

And a bit many do not consider, the ATO has its hand out – GST applies!

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A business owner is perfectly entitled to:

  1. Pass on transaction costs in a reasonable manner to the purchaser as they see fit, and as the rules allow, and/or
  2. Act like a complete idiot.

Seems like you have encountered one who embraces both.

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