Should the government prohibit Credit Card surcharges?

[Brendan Burgess]

Re: Public consultation on credit card surcharges

Hi HorseBox

I think you are being a bit hard on me.

1) I say that the company is charged 3%. I point out later that Amex charges 3.5% and Visa charges 2%. The point is that the company has an extra charge for accepting credit cards and they pass it on.

2) low margin businesses such as travel agencies and other low cost business models will have to stop accepting credit cards if they are not allowed pass on the cost to them.

Some companies have surcharges for using credit cards. Others have higher prices all round and don't discriminate between the different ways of paying. That is competition as it should be. It would be wrong to force all companies to have the same pricing model.

3)

"The best protection for consumers is competition, choice"

Yes, but on a level playing field. If a consumer is penalised for one method of payment over another, is that real choice?

Of course, it's real choice. You can choose to buy petrol at a station which accepts credit cards or one which does not accept credit cards. If one imposes a surcharge for accepting credit cards, you can take your business elsewhere.

 

[Riddler]

Re: Public consultation on credit card surcharges

http://www.choosingandusing.com/ Example of an industry doing the right thing by consumers. I believe this initiative was originated in the US through the use of summary boxes/schumar box. Works to standardise offerings within a easy to read format containing key information allowing for a monthly comparison. This is more like the innovative industry iniatives required of Irish financial service providers.

 

[HorseBox]

Re: Public consultation on credit card surcharges

Hi Brendan,

Was just being a bit of a devil's advocate. No offence intended.

I do understand the fact that consumers have responsibilities and need to put effort into their purchasing, and that is something that is often overlooked. The cliche that the consumer is always right is, of course, wrong, and extra regulation usually just clouds issues.

However, on this one issue, I think rules are needed. Not because consumers need protection from themselves or to enforce a unilateral pricing model, but to reduce the scope for some retailers to slide in extra margins on the pretence of it being a surcharge.

Transparency in this issue can only be good for consumers. If not an outright ban on surcharges, then some way needs to be found to make sure that extra margins are not being shuffled in on the cost of a credit card transaction, as a way to gouge extra revenue for the retailer. I think it is fair that this point is addressed.

 

[Brendan Burgess]

Re: Public consultation on credit card surcharges

Hi HorseBox

No offence taken.

You make good points, but then lose them in language which strikes as OTT

then some way needs to be found to make sure that extra margins are not being shuffled in on the cost of a credit card transaction, as a way to gouge extra revenue for the retailer. I think it is fair that this point is addressed.

If directski.com charges me €1000 for a holiday paid by Laser Card and €1,000 + 5% for a holiday paid by Credit Card, does it matter as long as they specify the charges up front? I would prefer to pay €1,000 + a €50 CC surcharge than €1,100 to someone who does not charge a surcharge.

The retailer should be free to set their prices. It does not have to be that they recover only their costs. Some charge less than the cost to them - some charge more. As long as it is transparent, then it's ok.

 

[Sunny]

Re: Public consultation on credit card surcharges

Hi HorseBox

If directski.com charges me €1000 for a holiday paid by Laser Card and €1,000 + 5% for a holiday paid by Credit Card, does it matter as long as they specify the charges up front? I would prefer to pay €1,000 + a €50 CC surcharge than €1,100 to someone who does not charge a surcharge.

The retailer should be free to set their prices. It does not have to be that they recover only their costs. Some charge less than the cost to them - some charge more. As long as it is transparent, then it's ok.

I wouldn't have a problem if directski advertised prices as €1050 including credit card surcharge but they don't and neither do ticketmaster, airlines etc. They still advertise the price as €1000 in their headline advertising and put the surcharge in tiny writing down the bottom or when you go and book it. Also, retailers are allowed and entitled to sell at whatever price they want. I just don't think they are entitled to blame the credit card costs if they are are also using it to increase margins on good sold. Why don't they increase their label price and make the credit card surcharge exactly the same as what they are being charged for accepting it. Its hidden charges just like the so called fuel surcharge by airlines. They are just trying to avoid raising the advertised or headline price while still charging more. How can this be good for the consumer?

 

[ubiquitous]

Re: Public consultation on credit card surcharges

I own my own small business and my customers comprise both consumers and businesses. When the business was formed, we opened a merchant account with a Credit Card company and for a number of years our customers could opt to pay us by credit card if they wished. We eventually withdrew this service and closed our merchant account partly because comparitively few customers ever paid by credit card but also because we found that the procedures we had implemented in order to handle credit card receipts involved a fair degree of hassle, which simply wasn't worth it.

We could have opted to charge an extra fee for handling credit card transactions but in our own case we didn't, as we felt it was worth bothering with. Based on our experience, I can understand why many businesses do implement such surcharges, if they wish to provide this option.

 

[MOB]

Re: Public consultation on credit card surcharges

"The retailer should be free to set their prices. It does not have to be that they recover only their costs. Some charge less than the cost to them - some charge more. As long as it is transparent, then it's ok."

It is hard to argue with the logic of this. However, this debate is being conducted in a forum largely populated by the relatively young, relatively well educated, relatively well informed consumer. There are many consumers out there who are not that well educated, not that well informed, and not that well off. These are people who are easily victimised in their financial dealings. To some extent, it is their own fault. But to some extent, they are victims of the suppliers who take advantage of their lack of savvy. This is part of the reason why the large grocery chains can get away with charging a little more in their shops in poorer areas.

Of course one wants to avoid straying too much into the area of a nanny state. But if educating\informing consumers can demonstrably be shown not to be working in certain areas, and then I think that regulation may have some part to play.

 

[ClubMan]

Re: Public consultation on credit card surcharges

Of course one wants to avoid straying too much into the area of a nanny state. But if educating\informing consumers can demonstrably be shown not to be working in certain areas, and then I think that regulation may have some part to play.

Watch a few episodes of Show Me The Money. Do you want financial industry regulatory legislation to be driven by the experiences of people like this?

 

[HorseBox]

Re: Public consultation on credit card surcharges

The retailer should be free to set their prices. It does not have to be that they recover only their costs. Some charge less than the cost to them - some charge more. As long as it is transparent, then it's ok.

If retailers recover more than the cost - i.e. they charge an extra margin on top of the cost to them of facilitating the transaction - then they should not be allowed to pass this off to the consumer as a credit card surcharge to cover costs. Retailers usually pass it off as a passed-on third-party cost, as if it were somehow out of their hands. Usually it is not. It is a passed-on third-party cost with a juicy extra margin for the retailer on top. Therefore, the customer is unwittingly buying an extra product without realising it. That, to me, is dishonest. This transparency issue needs to be addressed.

If the consumer is paying for a margin on the CC transaction too, the consumer should be made aware of this, so that s/he can make an informed choice about whether they want to purchase this unordered, unwanted product. There is an entire hidden industry out there on the "sale" of CC surcharges, which cannot be quantified because the retailer is not obliged to provide information. Is that transparency and consumer friendly?

 

[Brendan Burgess]

Re: Public consultation on credit card surcharges

The cost of a direct ski holiday is €1,000 and that is what the majority of customers pay.

The cost of a direct ski holiday for the minority who want to finance their holiday using the credit card is the additional €50.

They are not under any obligation to pay by credit card. They are made aware of the charges up front.

I agree that a company must make their customer aware as soon as possible. But they don't need to advertise the cost as €1050 in their ads.

A company might consider noting in its ads, "Payments by CC welcome, but a surcharge applies". Although I personally hate all these ludicrous "Terms and Conditions apply", "AIB is regulated by the Financial Regulator". "Your call may be recorded for training purposes".

 

[Sunny]

Re: Public consultation on credit card surcharges

So basically we are telling people that you will have to pay more unless you are willing to carry around thousands of euro and pay in cash???

Surely it is up to businesses to make it convenient for customers to do business with them. If it costs them so much to administer credit cards, don't offer to accept them. I would prefer that than paying a 7.48% surcharge and knowing I am being screwed with a higher price than advertised. But its ok I suppose because they are telling me upfront that they are screwing me????

 

[Purple]

Re: Public consultation on credit card surcharges

But its ok I suppose because they are telling me upfront that they are screwing me????

It's OK because you have the choice not to buy.

 

[Sunny]

Re: Public consultation on credit card surcharges

It's OK because you have the choice not to buy.

This argument gets thrown about in every debate about consumer rights and companies pricing policies. How does that make it right that companies have the right to advertise one price but then increase the price it actually charges by introducing a so-called surcharge which not only covers the costs incurred administrating the credit card payment but also adds a margin onto the final selling price for extra profit for the company. I would happily (well not really) pay the surcharge if I knew that every cent was to cover a cost incurred by the company due to my method of payment. However, if they are keeping some of the charge for themselves, how is that not misleading consumers.

Also, if retailers are so unhappy with the cost of accepting credit cards, why don't they get together and do something about it or else do what you suggest and 'not buy' or in this case refuse to accept the credit card. That will get the banks and credit card companies thinking

 

[HorseBox]

Re: Public consultation on credit card surcharges

It's OK because you have the choice not to buy.

That's not choice. You can't just tell someone that they can like it or lump it, and call that consumer choice. Particularly if their original purchase decision was made on a differently-advertised price, and particularly if everybody is applying a surcharge, such as in the case of online airline bookings. Where do you go for an alternative?

It's like telling a very hungry person that they are welcome to buy the sandwich from you that you are holding in your right hand, but that they will also get punched in the face with your left hand if they choose to buy it. It isn't a real choice. Starve, or get a punch in the face if you eat.

Also, Brendan said: "The cost of a direct ski holiday for the minority who want to finance their holiday using the credit card is the additional €50."

People who finance purchases using a credit card already pay for the privellege in the form of interest to the bank who issued it. If the retailer also charges for its use, it is a double whammy.

 

[ubiquitous]

Re: Public consultation on credit card surcharges

Also, if retailers are so unhappy with the cost of accepting credit cards, why don't they get together and do something about it or else do what you suggest and 'not buy' or in this case refuse to accept the credit card. That will get the banks and credit card companies thinking

Its impractical to expect businesses in most consumer sectors such as grocery, petrol retailing etc to not to provide credit card facilities. They would be cutting their commercial throats by doing so.

 

[Sunny]

Re: Public consultation on credit card surcharges

Its impractical to expect businesses in most consumer sectors such as grocery, petrol retailing etc to not to provide credit card facilities. They would be cutting their commercial throats by doing so.

Exactly. Its a cost of doing business so why don't they include it in the their prices like the ESB and wage costs instead of adding on a surcharge that everyone knows more then covers the cost to the business of accepting the credit card.

What would peoples reaction be if the banks turned around and said maintaining ATM machines was costly and so they are introducing a surcharge of 5% on every cash withdrawal. Then when people complain, the banks turn around and say well if you don't like it, you can keep your money under the bed or use a laser/credit card to buy something. It is no different.

 

[MOB]

Re: Public consultation on credit card surcharges

"Watch a few episodes of Show Me The Money. Do you want financial industry regulatory legislation to be driven by the experiences of people like this? "

All joking aside, it's an issue that troubles me slightly. Take as an example the "Section 68" letter which solicitors have to issue clients. Most of the people on AAM would read this. But most of my clients wouldn't. I could put in there that if I need it, they will be obliged to donate their one remaining good kidney and they wouldn't blink. I love the free market, but sometimes it feels a little bit dirty.......

I think perhaps that free\unregulated markets give less trouble in a society where ethical (business) behaviour is regarded as highly important. I don't think we have one, though I have no doubt that it is getting better.

 

[MOB]

Re: Public consultation on credit card surcharges

"What would peoples reaction be if the banks turned around and said maintaining ATM machines was costly and so they are introducing a surcharge of 5% on every cash withdrawal. "

Well, for people in business, something like this is already a reality. In some circumstances, the banks do indeed make an additional charge (a handling charge) for cash lodgements and withdrawals.

 

[Sunny]

Re: Public consultation on credit card surcharges

"What would peoples reaction be if the banks turned around and said maintaining ATM machines was costly and so they are introducing a surcharge of 5% on every cash withdrawal. "

Well, for people in business, something like this is already a reality. In some circumstances, the banks do indeed make an additional charge (a handling charge) for cash lodgements and withdrawals.

Yes but maybe if people were encouraged to pay by credit card, businesses could save on the cash handling charge!!! And there is less chance of armed robberies! Or companies should introduce a "cash surcharge" to cover the handling charge if they are being consistant

But its not the point. I am talking about the man on the street using an ATM machine and being charged 5% because it costs the banks money paying security firms to fill the ATM machines with cash.

 

[ubiquitous]

Re: Public consultation on credit card surcharges

Take as an example the "Section 68" letter which solicitors have to issue clients. Most of the people on AAM would read this. But most of my clients wouldn't. I could put in there that if I need it, they will be obliged to donate their one remaining good kidney and they wouldn't blink. I love the free market, but sometimes it feels a little bit dirty.......

I think you underestimate the value to clients of the S.68 letter and its practical necessity in protecting them from blatant overcharging. In the absence of a S.68 letter the client is pretty much powerless if the solicitor tries to blatantly overcharge them, unless the client wants to go the whole hog and file a complaint with the Law Society or refer the bill to the Taxing Master. From experience, I know that clients are generally reluctant to involve themselves in these processses so the S.68 letter can be very important to them.

Exactly. Its a cost of doing business so why don't they include it in the their prices like the ESB and wage costs instead of adding on a surcharge that everyone knows more then covers the cost to the business of accepting the credit card.

I buy fuel every week with my credit card. I often wonder how on earth the credit card company ends up with almost the same margin on a €50 petrol transaction as the retailer gets. I also wonder why the guy who pays with a €50 note instead of a credit card doesn't get some sort of incentive for paying in cash, as the retailers margin on the cash transaction will be much higher. Is the guy with the €50 note effectively subsidising me?