Surcharge Likely For Credit Card Users

The Age

Wednesday March 22, 2006

PETER WEEKES, PERSONAL FINANCE REPORTER, With AAP

CONSUMERS may be forced to pay more for electronic transactions, with a report revealing a dramatic jump in the number of businesses planning to impose a surcharge on credit-card payments in the next six months.

The report, by banking research firm East & Partners, also predicted that as the use of cash and cheques continued to decline, web-based payments, which generally require credit cards, could jump to 10 per cent of transactions within a year.

The company's principal analyst, Paul Dowling, said merchants were starting to recognise surcharges as a form of income.

"This is increasingly the case for smaller and middle market businesses - who having no doubt been on the receiving end of surcharging themselves from a telco or airline - have asked 'why don't we do it?'," Mr Dowling said.

In 2003, the Reserve Bank removed restrictions on merchants imposing a surcharge on credit card payments.

"The Reserve Bank of Australia re-regulation assumed merchants wouldn't surcharge as this would push customers away, but the surcharging sea change that is taking place now seems to be having the opposite effect," Mr Dowling said.

The Australian Consumers Association said the expected jump in the number of merchants charging extra "revealed a potential weakness" in the RBA's reform program.

"The RBA believed that by making surcharges explicit consumers would vote with their feet and competitive pressure would bring surcharging down," said the ACA's financial services policy officer, Nick Coates.

However, there were few alternatives when it came to paying for goods and services over the phone or internet, he said. The report found 16.6 per cent of middle market companies - with turnovers between $20 million and $340 million - planned to impose a surcharge, compared with 12.2 per cent six months ago.

Small to medium-enterprises ($5-$20 million) followed suit, with 14 per cent saying they would apply a surcharge, up from 11.9 per cent. And the top 500 companies segment (upwards of $340 million) led the charge, with 19.4 per cent saying they would surcharge, up from 16.5 per cent. -- With AAP