The Murray Inquiry Wants To Reform Bank Fees On Credit Cards To Cut Surcharges

Getty/ Matt Cardy

Excessive credit card surcharges, such as those applied to plane tickets, would stop under changes recommended by the Murray inquiry into the financial system.

The Murray report, released today, recommends an overhaul of interchange fees and the introduction of a three-tier system for low, medium and high cost credit cards which more accurately reflects the true costs to banks.

The report recommends hard caps to reduce the difference in fees paid by small and large merchants. It wants to prevent over-surcharging and improve enforceability, especially when consumers are using low cost debit cards.

The report cites the example of the $9 payment surcharge on an airline booking. Under this proposal, someone using a debit card to pay for a ticket would avoid the extra fee.

Under the Murray proposal, minimum spend conditions for consumer paying with a debit card are also likely to disappear.

There’s no doubt that as financial services have moved to electronic payment, especially via credit cards, the banks have found a strong new revenue stream.

And some merchants have also been adding to their profitability via a range of credit card surcharges which do not reflect the true cost.

The Inquiry says it considered banning the complex interchange card fees altogether in a bid to “improve efficiency by forcing customers and merchants to pay directly for the benefits they each receive”, but the idea was scrapped due to the high transitional costs.

This chart explains what how the Murray recommendations would work to cut surcharges:

Source: Financial Services Inquiry report.

And if you are wondering why the whole process needs an overhaul then this chart, which explains what happens every time you use a credit card, will do your head in. It seems far more complicated than necessary.

Source: Financial Services Inquiry report.

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