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How much is it really costing you to use tap and go for your credit card

Consumers who use their credit card for purchases are charged higher fees than those who prefer direct debit (image is a stock image)

How much does it REALLY cost you to use your credit card, but there is a simple and convenient alternative

  • The Reserve Bank of Australia has revealed the true fees charged by credit card companies
  • Diners Club charges the highest average merchant transaction fees of 1.7 percent
  • American Express had average rates of 1.3 percent, making it the second highest
  • Mastercard and Visa have typical business fees of 0.9 percent for purchases

Consumers who use their credit card to make purchases are charged higher fees than those who prefer debit cards.

The Reserve Bank of Australia revealed the merchant fees that major credit card companies charge retailers, which are then passed on to customers.

With inflation at the highest level in 32 years, the RBA has offered some helpful advice, pointing out that smaller shops were often charged higher fees than larger retailers.

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“In particular, smaller companies tend to face significantly higher average business rates than larger companies,” he said.

Consumers who use their credit card for purchases are charged higher fees than those who prefer direct debit (image is a stock image)

Consumers who use their credit card for purchases are charged higher fees than those who prefer direct debit (image is a stock image)

An article by economists Troy Gill, Cara Holland, and Georgia Wiley revealed that Diners Club had the highest average transaction fees of 1.7 percent.

Credit card company merchant fees

DINING CLUB: 1.7 percent

AMERICAN EXPRESS: 1.3 percent

MASTER CARD/VISA: 0.9 percent

DEBIT CARDS: 0.3 percent

American Express was also expensive, with typical rates of 1.3 percent.

The major credit card brands, Mastercard and Visa, had merchant fees averaging 0.9 percent.

Those who wanted to save money were advised to use their debit card, with the RBA noting that EFTPOS, or electronic funds transfer at the point of sale, had much lower average transaction fees of 0.3 per cent.

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“Across all merchants, debit cards are still significantly cheaper for businesses than credit cards,” the Reserve Bank newspaper said.

‘Payments made through the domestic debit card network, EFTPOS, are generally the least expensive, costing merchants an average of 0.3 per cent of the value of the transaction; this cost has remained virtually unchanged over the last decade.’

Tap-and-go payments come with the same fees as inserting a card into an EFTPOS machine.

Inflation in the year to June soared 6.1 per cent but is forecast by the Reserve Bank to hit 7.75 per cent by the end of 2022, making the cost of living a key issue.

Since the start of the pandemic, tap and go credit card transactions have been replacing bill payments.

“Cards are the most widely used payment method in Australia,” the RBA said.

“Over the last few decades, card payments have grown considerably, driven by changing consumer preferences and growing card acceptance by businesses.

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“The Covid-19 pandemic reinforced this trend, with many businesses discouraging the use of cash due to hygiene concerns, while consumers also used less cash and made an increasing share of their purchases online.”

Even before the 2019 pandemic, only 32% of in-person transactions were in cash.

The Reserve Bank’s rules were updated in 2013, allowing retailers to charge customers a fee to reflect the merchant fees credit card companies were charging them, but are prohibited from charging excessive fees.

This has caused credit card merchant fees to decline over the past decade.

A Reserve Bank article by economists Troy Gill, Cara Holland and Georgia Wiley revealed that Diners Club had the highest average transaction fees of 1.7 percent.  American Express was also expensive, with typical rates of 1.3 percent.  The major credit card brands, Mastercard and Visa, had merchant fees averaging 0.9 percent.

A Reserve Bank article by economists Troy Gill, Cara Holland and Georgia Wiley revealed that Diners Club had the highest average transaction fees of 1.7 percent. American Express was also expensive, with typical rates of 1.3 percent. The major credit card brands, Mastercard and Visa, had merchant fees averaging 0.9 percent.

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