Why banning surcharges may hike prices for all – The Front Page

Even if we could do away with all banking fees, should we? And is it time we just all go back to using cold, hard cash?

The Government plans to ban retailers from being able to add surcharges to most in-store card payments by the end of May next year.

The change will save shoppers but cost merchants, who will need to absorb the cost of offering contactless payments or pass it on to customers by hiking prices.

Massey University Associate Professor from the School of Accountancy, Economics and Finance, Claire Matthews, told The Front Page she doesn’t think banning surcharges is the right move.

“Because what will happen is the business is still going to incur that cost. So, if they haven’t been able to absorb it up till now, then I don’t see that they’re going to be able to absorb it. What they will have to do is build it into their cost structure and, therefore, into their prices.

“Rather than individual customers paying, we will all end up paying higher prices. So, it’s not like it gets rid of the cost to the business; it just changes who pays for it.

“Even if you’re paying with cash, you’re going to end up paying a higher price because some consumers are paying via PayWave or credit card. So there’s a question as to whether that’s fair,” she said.

Matthews thinks the Government would be better placed to make sure businesses are only passing on the actual cost of fees to consumers.

“I believe that the Commerce Commission was doing some work in this regard to make sure that, for example, if a business is being charged 50c, then that’s the charge they’re passing on to the customer. They weren’t taking the opportunity to say, surcharge you a dollar and make an extra 50c.

“The Government could also be looking at costs that the credit card companies and the banks are charging businesses to make sure that those are reasonable and that the costs they’re passing on, again, reflect the costs to them for those transactions,” she said.

Theoretically, society could return to cash to avoid such fees, but Matthews said it’s become increasingly difficult to even get cash.

“There aren’t the number of ATMs around, certainly not bank ATMs, anymore. And if you go to a non-bank ATM, there are fees associated with those, quite large fees actually.

“The reality is that businesses don’t actually want you to deal with cash because if they’re collecting cash, then they’ve got to do something with it, and that becomes a hassle, particularly in smaller communities because they don’t have access to bank services to be able to offload it easily,” she said.

“There’s a justification for arguing that if businesses are going to accept cash that they should be able to surcharge for that because it’s actually quite expensive for them to manage it.”

Listen to the full episode to hear more about what would happen if the Government banned all charges.

The Front Page is a daily news podcast from the New Zealand Herald, available to listen to every weekday from 5am. The podcast is presented by Chelsea Daniels, an Auckland-based journalist with a background in world news and crime/justice reporting who joined NZME in 2016.

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