Methods of payment that incur a fee, and fee-free payment options

[Marts]

I have recently been moved from one Internet provider to another. I got my first bill today. My account with the original ISP was migrated over including a Direct Debit arrangement. As I loathe DD I discovered that Bpay is available with the new provider. Ripper. Then I read the bill. DD is the ISP’s only free method of payment. All other forms including Bpay, incur a $3.50 fee per payment.

My bill is $100/mth fixed. I was planning to set up Bpay and pay $50 a pay (fortnightly), but the $3.50 charge is effectively a 7% fee, far more than what any credit card or other payment method costs elsewhere.

The government is banning credit card fees starting later this year. I wish that it would do the same for all methods of online payments. I abhor direct debit, this being the first time in 30 odd years of online bill payments that I’ve had to use it. The other option was to change providers, I guess. Bpay has always been my prefered method for all utilities.

With Bpay all bills get paid when I get paid each fortnight. What’s left over is for me to do with what I will. But DD doesn’t allow this. It’s a fixed monthly payment which can occur any time within the fortnightly pay cycle.

Am I alone with this view of Direct Debit?

[phb]

Direct Debit doesn’t concern me for fix cost services such as RSP/NBN, mobiles, health insurance etc. This is because one knows how much to budget for each upcoming bill.

With variable payments such as electricity, water bills etc where the amount on each bill can change substantially, I prefer still to pay each bill separately either by electronic funds transfers (EFT), Bpay or cards (also allows me to double check the bill and amounts). This is so that I can plan for the bill and ensure there is enough in the account to pay the bill.

I also never direct debit subscriptions such as magazines, streaming services etc, as I want control when it chose not to continue without the hassle of doing such if it was direct debit.

Most of these are now done to a card rather than scheduled EFTs. If there is a problem in the future, there is the opportunity to request chargebacks or to cancel the card. This provides some control. The only downside is if the business has a hiccup, there could be accidental double charging. While these are rare and usually not limited to one account holder, they can occur. To me the convenience of having regular fixed amount direct debits automatically paid overrides any risks.

[meltam]

I prefer to pay by direct debit from my credit card. Generally, with the ongoing direct debits there is no credit card surcharge.

I have had problems in the past when I have legitimately cancelled a service/product and the provider did not stop the ongoing payments. Using the credit card meant I could challenge and cancel the deductions in a timely fashion without the co-operation of the provider.

I use BPay to pay one-off bills, but I can’t remember being charged a fee for the privilege.

Options:-

@Marts

My bill is $100/mth fixed. I was planning to set up Bpay and pay $50 a pay (fortnightly), but the $3.50 charge is effectively a 7% fee

If you chose to go down this path you are voluntarily increasing the cost of your service by $3.50/3.5%. Perhaps instead you could instead save the $50 per pay into an account, and pay out $100 every 28 days and save $3.50 per month?

Another option is to find another ISP (such as Aussie Broadband) who does not appear to charge for BPay.

[Marts]

@meltam

If you chose to go down this path

I haven’t chosen to go down this path, not after I saw that they charge for Bpay transactions.

Maybe I should have clarified my original post - it’s about Bpay and other methods of payments that companies charge fees for. I understand why they prefer DD - they’re in control of the funds, whereas with Bpay, they’re not.

The ISP is Tangerine. I was with Buddy until Aussie BB, its owner, sold the retailer to Tangerine. Buddy only had DD so if I wanted the cheaper internet service I had to put up with the DD payment. But then I see that Bpay is offered with Tangerine but at a cost.

[phb]

With Tangerine, it states:

While direct debit can be set up using bank account or credit/debit cards, only bank account direct debits are free. Direct debits using credit/debit cards currently incurs a 1% surcharge.

It also states that ‘Direct debit from a bank account is our fee free payment method. For all other forms of payment, a fee of $3.50 applies.’ I read this as direct debit to a Visa/MasterCard credit/debit card is an extra $3.50 + 1% of the total bill. For a $100/month plan, it then becomes $104.54 ($54.48/year). This is a significant premium.

I personally would be looking around to see what other offering there are with other ISPs.

Tangerine is partly owned by…the Commonwealth Bank. Might explain why there as these fees.

[mark_m]

@phb

I read this as direct debit to a Visa/MasterCard credit/debit card is an extra $3.50 + 1% of the total bill.

Looks like a dubious and questionable policy given:

• Businesses can currently charge a surcharge for paying by card, but the surcharge must not be more than what it costs the business to use that payment type.
• If a business charges a payment surcharge, it must be able to prove the costs it is based on.
  Card surcharges | ACCC

Assume Tangerine defend the $3.50 as a bill paying fee. A fee they wave if one chooses a Direct Debit.
If that is OK what is there to stop any other enterprise advising they will be charging a flat bill payment fee other than for a single payment method (practical or otherwise)?
The last necessary to avoid falling out over the advertised price not being the true price.

[Marts]

I didn’t note that bit about the surcharges on credit cards for DD. My arrangement is direct debit from the bank account.

There is one other ISP, I forget the name of it, which is also an ABB wholesaler that has free Bpay and its 1000/100 plan is also $99.

I’m not that fussed, to be honest. While I don’t like DD per se, I can live with it.

[Pamela49]

I am with you, Marts! I will never use DD!!! It’s like giving strangers free access to your bank account. NO, thank you! Personally, I prefer to pay by credit card via PayPal! I have used PayPal for decades, never had the slightest trouble with them, and they helped very quickly when I had a problem with the person I was purchasing from. Quite simply, I trust them - and have no reason not to. In a few cases the seller of item or service I am paying for will charge me the PayPal fee they are charged, but it is only small and I am willing to pay it for the safety, convenience, ease and speed it gives me! Always go with your ‘gut’!

[carlos]

my grievence with DD is not so much the quiet take, its the black box murder mystery take

1. Rarely every same day, some months the usual 10th suddenly another as early as 2nd
2. my salary usually is the 3rd-7th, suddenly its the 10th
3. Double billing accident from the Supplier happened multiple times resulting in overdraw that takes many days to reverse,
4. They even had the gual to charge $15 fee when the second unauthorise double charge failed
5. Bank doesnt care, they dont rebate refund overdraw fees when the debitor mistake over charges you then refunds you

I’m pretty happy for a credit card for auto billing but direct debit from bank is fraught with hassles and landmines

With credit cards I don’t have the trouble with the variables of salary delays, double billing locking my entire spending capacity for days/weeks, the reverse is quicker and because the double charge never complete authorisation no fees are attracted on the retailers incompetence

The new fixed price fees everywhere for BPay are just criminal where has all this come from , BPay was supposed to be a sovereign infrastructure safe from the foreign credit cards, but now has huge fixed fees with vendors

[carlos]

@mark_m

Assume Tangerine defend the $3.50 as a bill paying fee. A fee they wave if one chooses a Direct Debit.

my credit card provider started charging $2.50

at what point is this farcical

My grevience was for months their computers were broken and DD and Bank deduction fee free options were broken/not supported for my bank vendor

It was impossible for months to pay fee free

The retailers said make 5 BPay payments will fix the break, I did that spent $10 in small repayments and failed to deliver their promise, I ended up paying every month $2.50 for 6 months ontop of the lying 5 will fix it and all months before that

[person]

@Marts

Am I alone with this view of Direct Debit?

No, you are not alone.

I try to avoid DD wherever possible. I probably wouldn’t go as far as using the word “abhor”.

I recognise that DD has quite a few flaws. In the past I have made suggestions in this forum for how it might at least be made less sucky. You may want to locate and review earlier discussions.

@Marts

effectively a 7% fee

That sounds extortionate. However …

@Marts

The government is banning credit card fees starting later this year. I wish that it would do the same for all methods of online payments.

The effect of that could be that the ISP simply refuses BPAY as an option i.e. if they can’t surcharge it. (Outside of the scope of ISPs, there are definitely providers where DD is their only payment mechanism.)

It is difficult to know whether the fee is their cost or purely being used to coerce you onto their preferred option or a combination of the two.

@Marts

I understand why they prefer DD - they’re in control of the funds, whereas with Bpay, they’re not.

To be more accurate … with DD they are in control of the timing and amount of the transaction. If the user is in control then the user can forget or do it late and/or do it for the wrong amount.

They are never in control of the funds though because it is still perfectly possible for a DD to fail due to insufficient funds.

@phb

Direct debits using credit/debit cards currently incurs a 1% surcharge.

Is that going to be within the scope of “banned” later in the year?

[person]

@mark_m

the surcharge must not be more than what it costs the business to use that payment type

That may be looking only at the transaction itself in isolation.

In the context here there are other differences in the cost to the business if you are in control e.g.

• they have to send something out to you asking you to pay and telling you the due date and amount
• they may send a reminder before the due date
• if you fail to pay the amount by the due date then they have to send further communication i.e. that it’s overdue
• at a certain point if you still haven’t paid then they have to commence recovery action
• some funds may never be recovered

(If it’s an ISP, it could be awkward if they cut you off due to non-payment since then by definition you can no longer necessarily receive their communication nor make a payment.)

[phb]

@person

Is that going to be within the scope of “banned” later in the year?

The RBA Conclusions Paper is for in person and not in person transactions, which includes online transactions. I can’t find in the conclusions paper exemptions are given for paying for services or bills. It appears to be broad bush for any Eftpos or Visa/MasterCard card surcharges. One could then deduce it will capture payment of bills such as that discussed in this thread.

However, the conclusion paper indicates that while surcharges aren’t allowed, discounts based on different payment methods will still be possible. This means a business might not offer any discount for Visa/MasterCard card, but might offer discounts for say EFTs, direct debits from bank accounts etc.

[mark_m]

@person

In the context here there are other differences in the cost to the business if you are in control

Telstra I pay monthly by which ever payment method suits, and not always from the same account. Most often by BPay, although sometimes by CC. The first has no extra cost, the second the fees vary depending if it is over the counter at Aust Post, via ones account on line or the Telstra App on the Mobile. Telstra sends an email notice with the invoice attached, as well as an SMS to say I have a new bill to view. Assume that is all done through an automated process. To also assume the SMS notification I usually receive after making payment is also automated.

ABB (Aussie BroadBand) I also pay monthly. Some time past I changed to paying by a DD from a Credit Card. Similar to Telstra I receive an email once per month with a billing notice and Invoice attached. Within a day or so 14 days following another email arrives with a payment receipt attached.

In this comparison it does not appear there is any reason to suggest maintaining control of a monthly payment should cost the business any more to manage. Reality is even setting up a direct debit is something the customer does through the Portal/App. OTOH if one is late paying, Telstra simply sends an automated reminder message. In the extreme missing paying for a whole month (past experience) with Telstra is most likely to see the missed payment added to the next bill and a late payment fee (penalty) included.

Should customers who choose to self pay and prefer to not pay by DD be billed a premium to cover other customers who are not? Similar could be said of a DD customer who has insufficient funds, and where the customers bank/settings refuse to overdraw an account to make the payment. There are risks of added costs for a business to recover an unpaid bill whether a Direct Debit or a customer choosing to manage payment directly.

My preference is to manage all regular payments. Direct Debits are used for a limited number of bills. All from a CC account. None are from a bank account.

Expect over the coming year the balance may change when the CC surcharge fee is no longer an added cost. BPay does have a transaction cost for a business. It was a heavily promoted product when first introduced by the big 4-banks. Perhaps the writing is on the wall for BPay which has been with us since 1997? Direct payment to an account providing the recipient is assured may be the lowest cost option for those intending to stay away from DD.

To also consider if one has insufficient finds in an account on the day, and one has not set up a DD. Many bills can be paid directly by CC. Useful when expected income is delayed or slow to arrive (for self employed not unusual). Also cheaper than to draw down on a costly business loan by the due date, providing flexibility, and or deferment of the draw down. Surcharge added in most instances.

[person]

@phb

while surcharges aren’t allowed, discounts based on different payment methods will still be possible

Does that mean that the Emperor has no clothes?

I think this illustrates why there is in practice a difference between in store and web site though.

At the end of the day, there is no difference between a surcharge and a discount.

Let’s say a business currently charges $10 for an item, and $10 is the cash price and there’s a 1.5% CC surcharge i.e. 15¢ surcharge.

OK, so that’s soon to be “banned”.

So the price is $10.15 and there’s a 15¢ discount for cash. Absolutely no change to the actual price paid or to the relative price differences between payment methods. And no requirement (presumably) to justify the surcharge for the CC (since there is now no surcharge, only a discount).

From a practical point of view, in store that would be a pain in the proverbial. They don’t want to muck around changing all the prices and potentially having to change the prices repeatedly as the “surcharge” changes. Maybe it gets easier when ESLs are widespread.

On the other hand, on a web site, it is perfectly possible to have N prices, one for each payment method - and of course relatively straightforward to change both the surcharges and the underlying prices at any time. Ideally, you would force the visitor to choose a payment method before displaying any prices and then you would only display the one price that applies to the chosen payment method.

On such a web site it becomes a zen question as to whether there is a surcharge or a discount. The prices just “are”. It is meaningless to ask the question, at least as an outsider.

So the only real gain on a web site is in transparency. The price that you are shown is the actual price to be paid - no surcharge and no discount.

This could even play into the hands of business - because businesses usually don’t want to compete solely on price (that’s a race to the bottom). So if a web site gets to suppress the display of prices until you choose a payment method, that’s a small win for the business.

[phb]

@person

From a practical point of view, in store that would be a pain in the proverbial.

The main pain will potentially be that they will need to display the price for an item and any discounted price at the shelf, as one of the justifications for banning surcharges is to ensure the displayed price is what consumers pay.

It may be easier for online purchases/payments or stores which have ability/space to show non-discounted and discounted prices…with potentially 2+ prices for the same item based on the payment method.

Bills are also a possibility. Say with Tangerine, they could have the non-discounted bill amount as say being AMEX, with other payment methods being cheaper. For example, since prices paid must be displayed:

• $105 for Amex
• $103 for Visa/MasterCard Debit/Credit Cards and PayPal
• $102 for BPay
• $101 for Eftpos
• $100 for direct debit from a bank account.

If they say they charge differently for online or phone payments (or at AusPost), some payment methods may have dual prices based on how payment is made. The 5 quickly becomes 7+ different prices. A very easy way to get disgruntled, confused customers.

I am unsure if a business would want to present each payment method bill amounts to retain income from surcharges. I could be wrong though.

[Fraser]

Interesting that sounds like a rather deliberate choice being made by your new ISP. I pay a lot of our bills via BPay as I maintain control over the when it is being paid. Yes, I accept it is an overhead for me to do so and in the past if BPay via credit card I was getting [redacted] points just for paying a bill which was going to be paid anyway. None of my BPay payments incur fees.

If I was being charged $3.50 for the pleasure, I would be paying via another method if available or taking my business else where.

If I pay my 28 Degrees card balance by BPay they say they will charge me $1.95 to do so, so I never have. They offer fee free ability to pay via once off Direct Credit so I do that instead.

With Direct Debit after initially setting it up there is no overhead, but there certainly used to be a difference between cancelling direct debits for credit cards or normal account. I forget which now unfortunately, but with one you control the cancellation and with the other you are relying on the merchant to cancel it at their end (this advice was from about 10 years ago from a friend who worked at a bank).

[TJO123]

I will not let companies take money from my account. I do not trust them. I do direct transfers where possible which are fee free.

[DPom]

No, you are not alone. I believe the government should make firms offer BSB payment options as well as direct debit. Ie the consumer should be able to choose the payment method, rather than being forced into direct debits

[DaveJ]

inflicting a charge for paying any bill should be illegal. Banks make profit like highway robbers.