40% of large merchants charging Aussies steep card surcharges

When David Murray’s Financial System Inquiry was published late last year, the paper recommended a cap on credit or debit card surcharges by merchants. With opportunities to submit comments on the Financial System Inquiry coming to a close today, East & Partners has just released figures that it says may see an extra flow of emails into the Treasurer’s inbox before the day comes to an end.

The study found that 40% of large card accepting merchants with turnovers over A$725 million are applying a high credit card charge of 1.5-2%, by comparison only 13.3% of merchants with turnovers below A$5 million are applying a 1.5-2% credit card surcharge.

This is significant when you consider 87.1% of these smaller businesses incur a merchant service fee from the card company of up to 1.5%, which is generally much higher than what is charged to the larger merchants.

Another finding from the East & Partners research was that larger merchants charge card service fees more regularly, in fact more than double that of micro businesses.

One of the highest surcharges mentioned in the report were taxi surcharges, with nearly 10% of taxi fare revenue driven from non-cash surcharges.

E&P Analyst Jessica Gao advised Aussie customers not to believe merchants applying “aggressive” surcharges when they refer to their card acceptance cost going up to justify surcharges on card payments, as they’ve actually decreased over recent times.

Figures show that the average merchant service fee of all credit cards for merchants in Australia regardless of their size was 1.62% in 2010, however dropped to 0.95% at the end of December 2014.

“Following pressure from the RBA, average surcharge levels have gone down from 2.60% to 1.60% across all merchant segments over the same period,” Gao explained.

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