Minister for Fair Trading, Virginia Judge, will today launch a NSW Government-led research project into exorbitant credit card surcharges being passed on to consumers.

Ms Judge said the Government would work with consumer group CHOICE on the project and release a report later this year.

“Businesses should be entitled to recover costs, but I don’t think it is fair for consumers to be slugged with charges on top just for using a credit card,” Ms Judge said.

“I think consumers feel ripped off paying a fee on top of the price you are paying for goods and services, particularly if you are buying online and payment options are limited.

“That’s why I am commissioning this research with CHOICE – to analyse business practices, quantify consumer impacts and compare these trends with international experience.”

Credit, debit and EFTPOS cards are part of the Australian payments system regulated by the Reserve Bank of Australia.

When a consumer uses a credit or debit card, a series of fees changes hands - the card issuer charges a fee to the merchant’s financial institution, which passes this fee on to the merchant, who may pass the fee onto the consumer in the form of a card surcharge.

“Following adjustments to merchant fee arrangements in 2003, the Reserve Bank abolished the ‘no surcharge rule’, allowing merchants to recover the costs of card use and impose an additional ‘fee for service’ on consumers,” Ms Judge said.

CHOICE Director of Communications and Campaigns Christopher Zinn said while the intention of allowing a surcharge was to encourage competition and lower the costs of using credit cards, an unintended consequence had been that those with market power such as taxis and airlines had been able to plug consumers up to ten percent for the use of credit cards.

“CHOICE believes a charge of one percent would be more in line with their cost recovery,” he said.

“In fact, CHOICE awarded Qantas and Tiger Airways a 2009 SHONKY for sky high surcharges of $7.70 per passenger on domestic sectors.”

Ms Judge said NSW Fair Trading had previously commissioned research by CHOICE into extended warranties, resulting in a 2008 report that showed many extended warranties did not provide good value for money.

The National Consumer Congress is being hosted in Sydney by CHOICE as part of its 50th anniversary celebrations. The theme of this year’s Congress is ‘Consumer Action’.

Information on Credit card fees can be viewed at this website.

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