Buying lunch for a few dollars or booking a holiday for a few thousand dollars and paying by credit card could result in consumers having to pay new surcharges. Some retailers are already charging a fee for paying by credit card. Even NZ Police are charging an extra 3% for people paying fines by credit card and petrol stations have also recently started adding a similar surcharge for credit card payments. This follows an agreement reached last August between the Commerce Commission and the credit card companies Visa and Mastercard, which allows retailers to charge extra on payments made with credit cards. The surcharges must be disclosed at the point of sale and must be a reasonable reflection of the retailers' costs. 

Retailers have always faced extra costs for accepting payment by credit card. Each time a credit cardholder makes a purchase, retailers pay a fee to their bank as part of the payment authorisation process. The fees are charged as a percentage of the sale, so the bigger the purchase the higher the charges. Retailers could end up paying up to 2.5% of their profits in credit-card fees that go towards covering the credit card companies' costs.

Until August 2009, the retailer was not allowed to include that fee in the price charged to the cardholder. However, they do now have the right to recover the extra cost from the relevant customer rather than passing on the cost in their price mark-up to all of their customers.

It is understood that the banks and credit card companies in NZ do not like the surcharges, as it could put pressure on them from their customers to reduce their fees, which are high compared to similar costs in Australia.

The introduction of surcharges will mean greater transparency for consumers, bringing what has been a hidden cost in the past into the open in the future. They can now be better informed about the cost of credit-card transactions to retailers and determine if they will accept the surcharge and what is reasonable. Over time the consumers, banks and retailers will come to an agreement about what is a reasonable surcharge.

Customers will need to be really careful and work out if the surcharge is worth it. Wilson Parking has opted to charge customers a flat 50c fee for paying by credit card, which at first seems reasonable, but this equates to a 5% surcharge on a $10 Earlybird daily parking fee, well above the expected 3% maximum surcharge percentage. In the past too many credit cardholders have used their card to make high cost purchases, taking advantage of the credit free periods to delay having to actually pay out. However, a 3% surcharge on a $5,000 purchase may now add $150 to the cost, so it’s questionable whether that will be a cost-effective option in future.

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