LETTER: Who really pays for credit card surcharge

DEAR News Of The Area,

FROM October 1, businesses across Australia can no longer add a surcharge when customers pay by Visa, Mastercard, eftpos or American Express.

The Reserve Bank says the change is designed to make pricing simpler and more transparent for consumers.

But there is a very obvious question that needs to be asked: who is actually going to pay for the cost of processing those card transactions?

It certainly won’t be the small business owner who can simply absorb another operating cost.

Small businesses are already dealing with rising wages, rent, electricity, insurance, freight and other operating expenses.

For many businesses, card-processing fees are another unavoidable cost of doing business.

The RBA itself acknowledges that businesses will continue to incur card-payment costs and says those costs can be incorporated into overall prices rather than charged separately.

And that is exactly what many businesses are likely to do.

Instead of seeing a $100 purchase with a separate card surcharge at the checkout, customers may simply see the price of the product increase to cover the cost of accepting cards.

So while the surcharge may disappear from the receipt, the cost hasn’t disappeared. It has simply been moved into the price of the product.

The RBA estimates that around 16 per cent of Australian businesses currently surcharge.

It has also acknowledged that businesses choosing to incorporate those costs into their prices could see their advertised prices increase.

This raises another important question: why should small businesses be expected to carry the burden of a payment system that is generating enormous revenues for the financial sector?

If governments and regulators genuinely want to reduce the cost of card payments, they should be putting much greater pressure on the banks, card networks and payment providers to reduce the fees charged to merchants. Banks make billions of dollars in profits, while many small businesses are fighting simply to remain viable.

It is difficult to understand why the solution is to tell a small business that it can no longer transparently pass on a legitimate cost to the customer who chooses to use a particular payment method.

The RBA says its reforms will include lower interchange fee caps and greater transparency around card-payment fees, with the intention of reducing costs for businesses.

That is welcome — but small businesses need to see those savings actually flow through.

The banks and payment providers should not be allowed to simply pocket the benefit while small businesses absorb the costs.

If governments want to remove card surcharges, then they should also ensure there is genuine downward pressure on the fees charged by the banks and card networks.

Because at the end of the day, a cost doesn’t disappear just because the Government bans the line on the receipt.

Someone still pays.

And if the Government isn’t prepared to make the banks and payment providers carry their share of the burden, then Australian consumers should expect that, in many cases, they will pay for it through higher prices.

The Government can call it a surcharge ban. For many small businesses and their customers, it may simply become another cost built into the price of doing business in Australia.

Regards,

Troy Radford, Tanilba Bay.