A Guide To Credit Card Surcharge Reforms
Over the past few weeks creditcard.com.au has received a large number of queries in regards to the new credit card surcharge reforms. Based on these queries we’ve put together five key things a business should know. The cap on credit surcharges already imposed by Visa, and any impending cap by other card providers (MasterCard, AMEX or Diners Club) will have many business owners questioning the value of processing credit card payments to their business. The changes, where Visa has capped the merchant fee surcharge for retailers who accept Visa at 1 percent, will affect revenue, transactions and other fees and surcharges. They will also be important to owners as consumers who use their credit cards for personal and business expenses.
If you’re a reader of Business Review Australia, chances are you’re going to want to know the impact of the recent reforms in both capacities, so here are some key points to keep in mind as you conduct your business and use your credit card for everyday purchases >>>
Following a campaign started by consumer rights group Choice, the RBA issued credit card surcharge guidelines which stated that the fees merchants pass on for processing credit card transactions must be capped to the ‘reasonable costs’ incurred when processing a transaction. For anyone starting out in business or reassessing their surcharges, these are the RBA’s best estimates of the costs that the four major credit card companies charge retailers purely for processing transactions worth $100:
- Visa & MasterCard: $0.85
- American Express: $1.81
- Diners Club: $2.08
Costs for processing a debit card transaction worth $100 are known to be around 10c. Except when it comes to Visa, for the next little while it’s up to you to determine reasonable costs. For those who thought that customers didn’t have this information, now you know that they do.
The head of Tyro payments, Jost Stollman, notes that as a business you won’t have an easy time responding to the changes MasterCard or the other processors might make in response to the RBA guidelines. Even Choice itself has issued a statement that customers can expect changes to trickle down over coming months. Bottom line, take your time before making changes and assess what you pass on to customers, aside from the now obligatory 1 percent for Visa payments. You’d expect businesses whose services you use to do the same, so it’s only fair.
Use The Tools Available To You
As a retailer, always remember that even when you are on a ‘blended’ fee structure with your bank, you can request a specific breakdown of the fees from them. You can determine a reasonable cost to pass on from this.
The banks also now have calculators for determining the cost of a ‘reasonable’ surcharge for you to apply. Try some out and compare results.
Study Your Options
Apart from everything mentioned above, if you’ve held off on offering credit card transactions, now could be a time to reconsider your options. Independent payment processors such as Tyro Payments provide a real alternative to the major operators and more than 7,300 businesses in Australia already use a Tyro payments system. The 1 percent cap on Visa payments applies across the board, so see what impact this has on the competition.
Don’t overdo it and add more on top than you know is fair, or rename processing surcharges as something else, or be prepared to suffer the consequences. The Change.org petition asking Jetstar to drop its $8.50 to a reasonable level has already seen 35,647 supporters signup at the time of writing this article (just 18 days into the campaign on Friday, April 5 2013). Be prepared with responses for customers who ask about the surcharges you add on, whether you display a sign, post something on your website or prepare staff with a policy response.
As A Consumer
When you are using your own credit card with a different business, be aware of what is and isn’t a fair and reasonable amount to pay for the privilege of using your card. If you do multiple transactions, take note of where you pay extra and how much you pay when you do. Watch for other categories of fees and charges to start popping up and demand an explanation if you perceive that a surcharge is unfair. Head over the Choice website to report an unfair surcharge you see.
It’s also the ideal time to reassess your card’s annual fee and bonus offers, especially if you use a business credit card. American Express, Westpac and others have competitive options.
About the Author
Kalianna is the Managing Editor of creditcard.com.au. She is a trained journalist and when she isn’t finding interesting ways to present the latest credit card related news she is a devoted foodie, is passionate about animal rights and travel and working on freelance writing projects in these areas. Follow Kalianna on Google+
Timeline: India takes unicorn leap with six in five days
We chart an historic week in India’s tech industry, where in just five days, between 5-9 April 2021, the country achieved six new unicorns, bringing India’s total to 10 in 2021 to date, an immense unicorn leap from just seven in 2020 and six in 2019.
April 5: Meesho
India’s first social commerce unicorn, Meesho raised US$300m from SoftBank, Facebook and Shunwei Capital, giving the Bangalore-based startup a US$2.1bn valuation, a threefold jump from its previous funding round in 2019. Founded in 2015 by two IIT-Delhi graduates, Meesho connects producers and resellers, helping small businesses sell through social media. It has 45m customers and has enabled 13m entrepreneurs to start their online businesses with no investment.
April 6: CRED
Founded just over two years ago, Bangalore-based credit card repayment app CRED raised US$215m from Falcon Edge Capital and Coatue, nearly trebling its valuation to US$2.2bn from its January US$80m round. Allowing customers to pay off their credit card debt while earning CRED coins which they cash in for rewards, CRED has grown rapidly during COVID-19, doubling its customer base to nearly 6 million in a year.
April 7: API Holdings / Groww
The first epharmacy startup to gain unicorn status, PharmEasy (API Holdings), which has digitised 60,000 brick and mortar pharmacies and 400 doctors across India, raised US$350m in a round led by Prosus Ventures. Founded by four former Flipkart employees as a way of making investing simple, investment platform Groww became India’s second-youngest fintech unicorn, raising US$83m in Series D funding led by Tiger Global, quadrupling its previous round in September.
April 8: ShareChat
New Delhi-grown social media startup ShareChat, founded in 2016 by Mohalla Tech raised US$502m from Lightspeed Ventures, Tiger Global, Twitter and Snap taking its raised total over six rounds to US$766m and pushing its valuation to US$2.1bn. The funding will be used to grow its user base and short video platform Moj, which launched in 2020 following TikTok’s ban in India. The regional language startup claims 280m users.
April 9: Gupshup
AI-led conversational message startup joined the unicorn club after raising US$100m from Tiger Global giving it a ten-fold valuation of US$1.4bn. The smart messaging platform, which has seen accelerated growth during the pandemic, was founded in Bangalore in 2005 by serial entrepreneur Beerud Sheth, whose online freelancing platform Elance is now listed. Gupshup’s API enables 100,000+ businesses to build messaging and conversation experiences across 30+ communication channels.