Our research shows that households do not know what they are paying in fees and charges on their credit cards, nor the value of “rewards” on these cards. This is over and above transaction surcharging which has been subject of recent regulatory review. The RBA says in 2015, households paid $1.5 billion in card fees, up 6.6% from the previous year.
In fact there have been a number of changes to the terms and conditions of credit cards from several of the large providers. This is in response to recent changes to payment regulation, and banks seeking to capture more value from non-revolving card holders.
It is worth checking the true value of rewards points, which we think are being devalued (the so called earn and burn rate) means you spend more for less benefit. In addition, fees on reward cards have been rising steadily.
In addition, there are a range of other potential transaction fees. For example, an Australian dollar transactions from overseas merchants now carries a fee, by for example the CBA. Whilst foreign currency transactions did cop a charge, Australian dollar transactions did not. The CBA says:
We charge you an international transaction fee when you make a purchase or obtain a cash advance (whether in a foreign currency or Australian dollars):
While overseas; or In Australia (for example online) where there is an overseas connection, as the merchant, or the financial institution or entity processing the transaction, is located overseas. The international transaction fee for these transactions is:
- Transactions converted by MasterCard® or Visa – 3.00%
- Transactions converted by American Express® – 2.00% (plus a currency conversion factor of 1.50% which is included in the converted transaction amount)
- Transactions in Australian dollars but with an overseas connection – 3.00%
- In some cases, overseas merchants may allow you to pay in Australian dollars, e.g. when you’re shopping online or over the phone. This is still considered an international transaction because your transaction is processed overseas.
- Note: Even though a merchant has a website address ending in ‘.com.au’ and displays prices in Australian dollars, they may still be located overseas or otherwise choose to process their credit card payments outside of Australia. It’s best to check with the merchant before you pay if you are unsure.
Depending on your card use – if you revolve and pay interest, then the interest charges will swamp most other charges, – it would be worth looking at some of the non-reward, no fee cards which are available, because these sneaky little fees soon add up.
We think there is a case to make the disclosure of fees on credit cards clearer, and for consumers to reconsider whether reward schemes attached to cards are worth having at all. You can compare cards here.
