Is this the end of credit and debit card surcharges?
Australian credit and debit card users could save up to $500 million in unnecessary fees if recommendations from David Murray’s Financial System Inquiry are implemented.
The inquiry, commissioned by Federal Treasurer Joe Hockey in December 2013, recommended a ban on debit card surcharges at retailers in its final report released yesterday.
Changes were also proposed for credit card surcharges, with the inquiry recommending that the Reserve Bank of Australia cap surcharges on Visa and Mastercard.
Additional reforms were proposed for surcharges on high-cost cards such as Amex and Diners, with the inquiry recommending these are capped at a reasonable cost.
EFTPOS providers have welcomed the reforms, which are aimed at addressing inequality between low cost, medium cost, and high cost card holders.
According to analysis by industry commentator and EFTPOS provider Tyro Payments, Australia’s 10 million standard card holders are currently being charged too much by retailers for using their card.
“About 10 million Australians have a standard credit or debit card, and they pay about $500 million per year, or $50 each, in extra fees to subsidise the lifestyles of five million richer Aussies with a premium card,” Tyro Payments CEO Jost Stollmann said.
“This is because retailers typically charge customers a standard 1% rate irrespective of what type of card is used.
“But banks charge retailers much higher fees for premium and platinum credit cards than standard cards used by lower income people. Effectively, this means the poor are subsiding the rich.”
In addition to credit and debit card surcharges, the inquiry examined various elements of Australia’s financial system. Other key recommendations included:
- Raising bank capital levels so that Australian banks are in the top quartile of banks internationally when it comes to capital levels.
- Adopting ‘bail-in’ bonds, to prevent taxpayers being required to bail-out banks in a financial crisis.
- Superannuations funds be forced to tender for accounts.
- Raising the minimum education standards for financial advisers.
- More transparent guidance for consumers making general insurance claims.