Credit card surcharges can be an expensive addition to any purchase, so it pays off to know when they are likely to come into play.
Between 2006 and 2010 the rate of surcharging jumped from a mere 7% to up to 20% for smaller retailers and 40% for major retailers, according to a Choice report commissioned by NSW Fair Trading.
The report also shows that most surcharges come as a percentage of the purchase, but they could also be charged as a flat-rate fee of up to $25 and either way it adds up to more credit card expenses for people to deal with.
Surcharge Changes
While credit card issuers and processors have no control over surcharges, the Reserve Bank of Australia recently decided to introduce new standards that will “limit surcharges to the reasonable cost of card acceptance”.
This improvement means that cardholders could still end up paying around 2% extra for using plastic, but that is a lot better than some of the charges people currently face.
But the changes will not come into place until January 2013 – until then cardholders will have to find a way to manage surcharges.
So here we take a look at the purchases that attract the most expensive surcharges around – airfares – and how they can be avoided.
Airline Card Fees
With every domestic airline in Australia charging money, this is the most common and one of the most expensive surcharges people come across. These include:
- Jetstar – $3.50 for domestic; $5 for international flights
- Qantas – $7.70 for domestic bookings; $30 for international ones
- Tiger – $7.50 fee for flights
- Virgin – $4.50 per person and sector for domestic flights; $25 for international flights
Rex, which does regional flights throughout Australia, is the only airline that charges a percentage, with the rates ranging from 1.76% of the transaction for Visa and MasterCard, up to 3.96% for American Express.
The good news is some of these fees can be avoided. Using a Jetstar credit card for booking flights with the company, for example, will mean cardholders avoid extra fees and still get points for paying with their card.
Choosing a MasterCard debit card for airfares from Qantas and Tiger has the same result, while most other airlines waive the fees if a BPay or other internet payment option is selected.
But for people with frequent flyer cards, these bookings are where you earn the most points so it may be worth just paying them for the extra points.
While airlines are not the only companies charging these types of fees, with telephone and utilities, restaurants and taxis also costing a lot more for card use, they are currently the most expensive by category and frequency.
Understanding the way these fees work and how much you will be charged gives you a chance to figure out the best way to pay for things and get as much value as possible out of every purchase.