Watch for credit card charge, shoppers told

Retailers surcharging customers for using credit cards were yesterday put on notice by the Commerce Commission, while consumer groups are advising people to check charges and shop around now that retailers are allowed to pass on credit card charges.

Last year the Commerce Commission reached a settlement with financial institutions that it hoped would lead to more transparent and lower charges for the use of credit cards. One aspect of the deal was that retailers are allowed to pass on credit card charges.

Independently owned BP stations are charging 60c extra for every transaction by credit card under $30 and 90c for every transaction over $30.

New Zealand Retailers' Association chief executive John Albertson said taxis have charged a $2 flat fee for some time on credit card transactions. He is aware that florists and also government departments are surcharging customers for using credit cards.

One view is retailers are putting pressure on credit card companies to lower merchant service charges by surcharging, but consumers are asking if the surcharges reflect the cost to retailers.

Under the settlement any surcharge should bear a reasonable relationship to the merchant service charge.

Visa New Zealand country manager Sean Preston said surcharging was unnecessary and unfairly shifted the cost of electronic payments to consumers.

"Is this additional surcharge being passed on to lower charges in the store?" he said.

It was too early to judge what impact the regime would have on interchange fees, which vary, Mr Preston said.

Commerce Commission general counsel Peter Taylor said the commission would be watching developments to ensure that the long-term interests of consumers were being served.

It was taking a close interest in the retailers' surcharges.

"Importantly, included in the settlements was a requirement that credit card issuers set their own credit card transaction fees in competition with one another," he said.

From April most retailers would pay lower fees to their banks on credit card transactions.

"As retailers now have the ability to pass the cost of credit card acceptance directly to the cardholder, pressure can be brought to bear on credit card issuers to reduce their transaction fees.

"This should over time result in decreased costs to credit card users, while benefiting retailers and their customers through reduced costs," Mr Taylor said.

The Automobile Association is advising motorists to check whether petrol stations were charging credit card fees.

"Previously, retailers could not pass on the credit card fees and instead absorbed the cost as part of their operating profit. This meant the fees were covered in the retail price, including those who paid cash," said AA PetrolWatch spokesperson Mark Stockdale.

"The inability for retailers to pass on bank fees was partly responsible for the closure of some independent service stations which faced bank fees that rose with the fuel price, while margins remained fixed."

Credit card fees have been an issue in many countries. The Reserve Bank of Australia moved in 2003 to regulate the level of so-called interchange fees over time from 0.95 per cent of transaction value to less than 0.5 per cent.

The interchange - or financial institution to financial institution - component of the merchant service charge is around 0.93 per cent in New Zealand and the total merchant service fee retailers pay varies between 1.3 per cent to 2.5 per cent, according to Mr Albertson.

"In time it is hoped that the interchange fee component will come down," Mr Albertson said.

Mr Albertson said the Commerce Commission and the Reserve Bank did not have the power to regulate credit card fees and last year's settlement was reached "on the courtroom stairs" before an expensive court action.

- NZPA