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RBA’s Proposed Credit Card Surcharge Ban Will Help the Wealthy and Stoke Inflation

The Australian Travel Industry Association (ATIA) has warned the Reserve Bank of Australia’s proposed ban on credit card surcharges could force up prices for all consumers – not just those that use credit cards – at a time when cost-of-living pressures remain acute.
 
ATIA Chief Executive Officer Dean Long said the travel industry faces a unique set of circumstances when it comes to payments - meaning the effect of any change will have widespread impacts on travel businesses and consumers.
 
International travel transactions average $6400 to $10,000 and are often paid 70-100 days in advance exposing travel businesses to unique risks. 
 
Given that the cost of a 1.3% credit card surcharge is $83 on $6400, it is unsurprising that 95% of ATIA members – Australia’s accredited travel agents, tour operators, consolidators and wholesalers – rely on surcharges to recover card payment costs where customer chooses to pay by card. 
 
But customers have a choice at the moment. ATIA estimates 47% of travel customers pay by cash or electronic funds transfer and are not subject to a surcharge. Credit card payments make up 44% of transactions, while debit cards make up the other 10%.
 
A complete surcharge ban would likely force a uniform shift in costs to higher base prices or increase service fees for all customers to recover costs regardless of how they choose to pay. This would unfairly force all consumers to pay more at a time when cost of living pressures are acute.
 
People who choose not to pay by credit card will be subsidising the benefits enjoyed by those who do - such as complementary travel insurance, rewards points, lounge access and preferential access to entertainment.
 
At the very least the RBA should restrict any ban to debit cards and maintain the surcharge on credit cards.
 
Travel industry payment providers can already tell the difference between debit and credit cards when processing transactions. Saying it’s hard to apply the right surcharge to debit and credit cards across the wider economy shows the big banks and other providers aren’t fully committed to supporting Australian businesses or their customers.
 
Scrapping credit card surcharging is an idea that just won’t fly and will ultimately add to inflation at a time when the RBA is concerned about its resurgence. 
 
QUOTE ATTRIBUTABLE TO ATIA CEO DEAN LONG
“Travel industry operators already give consumers the option to avoid credit card surcharges if they pay by cash or EFTPOS. If credit card surcharging is banned, the cost will have to be passed on to everyone not just people who pay by credit. This seems unfair and will be reflected in higher overall prices and this will stoke inflation. This comes at a time when prices for the Travel Industry have already been under pressure.
 
“Given credit cards, particularly platinum and premium credit cards are predominantly used by wealthier, older Australians, this is tantamount to Gen Zs and Millennials at the back of the plane in Economy subsidising Baby Boomers in Business and First Class.’’