Higher Merchant Fees for Visa Cards

[beardoc]

I recently enquired about getting a merchant facility through my professional organisation's relationship with a major bank and they sent back this:

            Visa Charges/Mastercard charges
Micropayments 0.26%/0.68%  (Less than $5 Visa/ $20 MasterCard scheme debit)
Scheme Debit 0.62%/0.34% (Visa or MasterCard Debit Card)
Standard 0.84%/0.68% (Hand keyed transactions)
Premium 1.23%/1.25% (Platinum)
Commercial 1.50%/1.47% (Business Card)
International* 1.87%/1.85% (Visa & MasterCard Cards from overseas)

I found it interesting that your Platinum card is actually costing the merchant more than a standard Visa/Mastercard - is this common?

 

[Evan]

I found it interesting that your Platinum card is actually costing the merchant more than a standard Visa/Mastercard - is this common?

Yes, thats why they push the platinum cards so much, they make more money !
Why the retailer has to suffer is beyond me... i mean a transaction is a transaction, the cost to process is the same regardless of if its a card or a platinum card.

Thats life.... But all these fees tell me 1.5% is a premium that a retailer should charge for a transaction... not 3% as some do.

E

 

[oz_mark]

Yes, thats why they push the platinum cards so much, they make more money !
Why the retailer has to suffer is beyond me... i mean a transaction is a transaction, the cost to process is the same regardless of if its a card or a platinum card.

Thats life.... But all these fees tell me 1.5% is a premium that a retailer should charge for a transaction... not 3% as some do.

Certainly is normal for the fee to be higher. In fact I remember once reading that some banks offer people premium cards after calculating that they are notr of much value to the bank. Moving to a premiuim card means they extract more fees!

One of the problems with the RBA reforms was that the retailer was free to charge whatever they liked for processing a CC transaction, not just passing the cost along. But looking at those rates, you can certainly see why they need to cap the points if they are giving 1 dollar = 1 FF point.

 

[beardoc]

Certainly is normal for the fee to be higher. In fact I remember once reading that some banks offer people premium cards after calculating that they are notr of much value to the bank. Moving to a premiuim card means they extract more fees!

One of the problems with the RBA reforms was that the retailer was free to charge whatever they liked for processing a CC transaction, not just passing the cost along. But looking at those rates, you can certainly see why they need to cap the points if they are giving 1 dollar = 1 FF point.

These I should point out that these rates are negotiated through a professional organisation, and are probably a little bit lower than the average of the rest of the "small trader" merchant public (I can also get an Amex merchant facility for 1.49% with no minimum revenue).

But I can see the effect of this differential is that merchant fees will get set at probably 2% for ALL Visa/Mastercard transactions, even though the majority of transactions would be at the general (non-premium) rates, and so it would lead to less use of credit cards owing to the large surcharges on ALL cards (I won't pay a surcharge of 2%, but I would a surcharge of 0.5%).

It strikes me as the banks are shooting themselves in the foot with these differentials.

 

[Chicken]

Where I work had merchant facility from NAB up until last year, and NAB moved everyone from blended rate (same rate for all schemes and all types of cards) to mixed rates (which is what you were quoted). So we changed to a bank which we already have a relationship with, and turned out they are still doing blended rate, which is cheaper than the rate for standard cards offered by NAB, not to mention a lot cheaper than other rates like premium / business / internation rates from NAB.

So I strongly suggest you get another quote from another bank.

 

[jingles]

Thats life.... But all these fees tell me 1.5% is a premium that a retailer should charge for a transaction... not 3% as some do.

E

I was once charged 5% for a restaurant to process my Visa card!

 

[Nutcase]

Where I work had merchant facility from NAB up until last year, and NAB moved everyone from blended rate (same rate for all schemes and all types of cards) to mixed rates (which is what you were quoted). So we changed to a bank which we already have a relationship with, and turned out they are still doing blended rate, which is cheaper than the rate for standard cards offered by NAB, not to mention a lot cheaper than other rates like premium / business / internation rates from NAB.

So I strongly suggest you get another quote from another bank.

Banks do differ in their charges depending on risk etc. With the blended rate this can be because of limitation in bank systems rather than anything else

 

[JohnK]

Australia should never have allowed surcharges to be levied on credit card payments.

Over the last 15-20 years the banks and retailers have been pushing consumers to rely on credit cards and less on cash and then continue to sling them with high interest rates and rip-off fees for the provilege of using credit.

 

[beardoc]

Australia should never have allowed surcharges to be levied on credit card payments.

Over the last 15-20 years the banks and retailers have been pushing consumers to rely on credit cards and less on cash and then continue to sling them with high interest rates and rip-off fees for the provilege of using credit.

If only merchants were limited to the cost of their merchant fees, I think it would be fair.

 

[JohnK]

If only merchants were limited to the cost of their merchant fees, I think it would be fair.

Agree the current fees are a lot higher than they actually get charged by the credit card company. But I also think that paying by cash should not be a cheaper option as it is actually more expensive to handle cash and the risk of carrying it on the premises and having to take it to the bank.

There should not be a surcharge in place as the retailer should be able to factor in the cost into the retail price. Anyway just my warped cynical mind at work again....

 

[one9]

...There should not be a surcharge in place as the retailer should be able to factor in the cost into the retail price. ....

I am sure many economists would disagree that the lowest prices would occur when some people have other peoples costs factored into the prices they pay.

 

[JohnK]

From now on for small purchases I will pay in $1 & $2 coins, possibly with silver coins as well, or for much larger purchases I will pay with $5 & $10 notes. Is this much better than paying by credit card? Which one costs less to process? Every form of payment costs a retailer time and money. It is much easier to recover these costs by passing on surcharges for people paying by credit cards as this is by far the most used form of payment.

Optus has recently started charging a payment processing fee. A what? This is definitely starting to border on the ridiculous. They are charging me $0.28 extra per month. I am almost certain that the programming changes would have cost more than the amount they are likely to recover.

There is this huge can of worms that has been left out in the open and most businesses are taking advantage of it. I call it blatant rip-off. You and the economists can call it what you like....

 

[codash1099]

From now on for small purchases I will pay in $1 & $2 coins, possibly with silver coins as well, or for much larger purchases I will pay with $5 & $10 notes. Is this much better than paying by credit card? Which one costs less to process? Every form of payment costs a retailer time and money. It is much easier to recover these costs by passing on surcharges for people paying by credit cards as this is by far the most used form of payment.

Optus has recently started charging a payment processing fee. A what? This is definitely starting to border on the ridiculous. They are charging me $0.28 extra per month. I am almost certain that the programming changes would have cost more than the amount they are likely to recover.

There is this huge can of worms that has been left out in the open and most businesses are taking advantage of it. I call it blatant rip-off. You and the economists can call it what you like....

I agree 100% but you're pushing the proverbial uphill with a pointed stick.

 

[JohnK]

I agree 100% but you're pushing the proverbial uphill with a pointed stick.

Yes I know. No need to get all worked up over such a minor issue like money....

 

[Mal]

From now on for small purchases I will pay in $1 & $2 coins, possibly with silver coins as well, or for much larger purchases I will pay with $5 & $10 notes.

Might be handy to know the Currency Act's definition of what they have to accept if you do this:

(summarised)
* not exceeding 20c if 1c and/or 2c coins are offered (however, it should be noted that these coins have been withdrawn from circulation but are still legal tender);
* not exceeding $5 if any of 5c, 10c, 20c and 50c coins are offered;
* not exceeding 10 times the face value if coins in the range 50c to $10 inclusive are offered; and
* to any value if coins of value greater than $10 are offered.

 

[JohnK]

The silliest thing about merchant fees on cards is that some places do not accept cash only credit cards and BPay. The biggest culprits are airlines like QF and DJ. Does anyone really think that QF charging an extra $6.60 for domestic bookings or DJ charging an extra $3 per sector is fair and good business practice?

And yes I know QF offers BPay as an option but not sure about DJ. I don't like using BPay but I am also lucky that I have fee free transactions with CBA. Most people have to pay transaction fees on their accounts.

 

[oz_mark]

The silliest thing about merchant fees on cards is that some places do not accept cash only credit cards and BPay. The biggest culprits are airlines like QF and DJ. Does anyone really think that QF charging an extra $6.60 for domestic bookings or DJ charging an extra $3 per sector is fair and good business practice?

Or Tiger charging a $5.00 'convenience fee' per sector.

 

[gaz1]

...... But I also think that paying by cash should not be a cheaper option as it is actually more expensive to handle cash and the risk of carrying it on the premises and having to take it to the bank.....

One of the bookshops over here actually charges a fee to pay by cash (free is by EftPOS & a smaller fee by M/C & Visa I think) for this reason!

Anyone else know of higher merchant fees on Platinum credit cards? I haven't heard anyone charging a higher fee for the Platinum cards yet, but if the fees are higher I guess this could happen.

Gary.

 

[Nutcase]

This issue has been raised previously. Yes, it's standard procedure NOW to differentiate between card types. If you notice, Overseas cards cost even more as do business cards. And you have also realised why banks now push platinum and business cards.

Some of you have claimed that the retailer should include the cost of a card transaction into the cost of goods - The RBA argued that this discriminates against those paying cash, hence the changes a few years ago to the scheme cards and interchange.

There have also been some claims that its not worth Optus passing on the fees to customers (28 cents in on case). Whilst this is true in this instance, Over the whole customer base, it ends up being several hundred thousand dollars - So yes it is worthwhile in them doing it. Dont forget that billing is a huge expense for theses businesses and anything that they can get back is money in the bank. Billing is a cost centre.

There are also other arguments like why Bpay isnt charged for (Diners Club do it) or why cash isn't charged for (Banks charge a cash handling fee sometimes) to which there is no clear answer.

Perhaps a more appropriate way of dealing with the issue is to offer a discount for cash or EFTPOS rather than a fee for a credit card.

If you really want to know about creidt card reform, try the RBA website

RBA: Media Release-Reform of Credit Card Schemes in Australia

One last note - Keep in mind just how much money we are talking here. If interchange is 0.50 - 0.6% of each credit card transaction and we spend 19 Billion plus per month - Well do the maths. This is a huge money making business.

Attached is the wholesale rates for interchange from Visa - This may help explain the situation - Please also note that not all is expressed as a % - Some are flat. Your bank needs to add its margin and other costs to this to make money.

Standard Consumer card Visa Credit transactions

Charity rate 0.0%
Visa Merchant Alliance Program rate 0.3300%
Micropayment rate 2.75 cents
Government Electronic rate 33.0 cents
Government Standard rate 81.4 cents
Utility Electronic rate 33.0 cents
Utility Standard rate 81.4 cents
Electronic rate 0.4411%
Express Payments and Small Ticket rate 0.4411%
Recurring Payment Transaction rate 0.4411%
Consumer Chip rate 0.5511%
Standard Rate 0.6017%

And for Platinum

Premium Consumer card Visa Credit transactions
Charity rate 0.0%
Visa Merchant Alliance Program rate 0.3300%
Premium Electronic rate 0.9900%
Premium Chip rate 1.10000%
Premium Standard rate 0.9900%

The rest is on the website;

Visa Australia | Interchange

 

[Peterpal1122]

Is there a way to receive payments online without going thru a Merchant Facility of a bank? or gateway like eway, SecurePay etc ?

Does Visa and mastercard allow small business to deal directly without routing thru a bank (for small business) ?