In March of this year the NSW government started a study looking into the charging of excessive credit card usage and bank fees by certain retailers, and industries such as taxicabs and airlines.

In particular the study will look at bank fees and charges with the intention of regulating and reducing them. There is to be particular emphasis on ‚Äòhidden’ or unexpected fees, so as to make using credit cards more user friendly and less predatory of individuals funds.

2003 Legislation

The charging of these fees have been allowed by the Reserve Bank since 2003, in order to allow retailers to pass on to the consumer some of the bank fees they incur for every transaction made using a credit card.

The intention was to encourage more retailers to accept credit cards for a much wider range of services. It was originally thought that this saving by retailers would reflect itself in the prices charged for goods and services, meaning that the consumer would not pay more in the long run. However certain industries have taken advantage of this legislation.

Worst Offenders

In particular, although not restricted to, airlines and taxi companies, many companies have been found to be charging up to ten percent of a transaction for the use of a credit card.

The actual cost to them of the transaction would be in the region of 1 to 1.5 %, and most outlets have significantly lower costs dealing with credit card payments than other methods, so this system is purely an opportunity for extra profit.

In particular with competitive industries such as airlines, these sorts of charges allow their published prices to be lower, giving them a certain edge in their marketing.

Reduced Earnings

The actual result of this whole process at the moment is that more consumers are returning to cheques as a way to pay for large items and services, and even cash has made a little comeback.

The actual total fees earned by the banks and credit card companies are thus reduced as fewer transactions are being carried out on the cards.

The costs to all parties involved in handling cheques is considerably higher than those of credit card payments, so almost everyone loses out.

New Regulation

New regulation is likely to involve a cap on percentages of fees being charged, with the most likely result being that surcharges applied to credit card transactions can only be up to a maximum amount comparable with the amount charged by banks and credit card clearer’s such as Visa and MasterCard. Hopefully this will have the effects originally envisaged in 2003.