Consumer Victory Over Credit Card Surcharges

Taxis are a great way to navigate through the great city of Sydney. They are easy, often accessible, and usually quite safe. Whether it is for a work function, an easy ride to the airport, a more accessible way to get around a city you are not familiar with, or to do the responsible thing after a few drinks, a taxi is the most convenient solution to your problem.

However, if you took a taxi recently and paid with a credit card, you were most likely unknowingly charged a surcharge. Unbeknownst to most customers, taxi companies charge a 10% surcharge for credit card paying customers but, thanks to new initiatives by the Reserve Bank of Australia, regulations are being changed to end these excessive merchant fees.

What?

I hear the shocked gasps of the masses, how can this be?

Those friendly people who shuttle us around different places – ripping us off, no way!

I’m sorry to say – way.

City taxi drivers are the worst of a bad bunch of drivers who overcharge their customers. In fact, the latest way taxi drivers in major cities like Sydney and Melbourne get an extra buck out of the customer is by charging an extra 10% when you use your credit card.

Michael, a 25 year old marketer who moved to Sydney from Newcastle last year said, “I usually try to catch taxi’s after a night out or if I’m going to a business conference. I didn’t even know I was being charged a surcharge for using my credit card. There was one time recently when I paid the cab fare using my credit card and it was supposed to cost about $28 to $30, but when I paid it, I was shocked to see it ended up costing around $35.”

He went on to say that, “Now that I know I think I will try using cash. I don’t think the charge is fair. I don’t see how they can justify 10%. On a big ride you could be looking at more than 10 or 11 bucks on top of the fare.”

That is an interesting question. Is it fair?

How Things Have Been

As of December 13, 2008, taxi fares in Melbourne rose 6.1%, charging a new flag fall rate of $3.20 and then $1.617 per kilometre travelled. So for a 20km trip it would cost you around $36. That is pretty pricey considering it is only 10 minutes worth of work for the driver. He or she is probably working around 12 hours or so that day, so if they pick up three 20 km trips an hour they would bring in $108 an hour. If we take into consideration the night loading rate of 20% (midnight – 5am), he would be taking close to $44 for each 20 km ride, with an additional $2 for a phone booking.

Now add in the 10% credit card charge and it would cost the passenger approximately $50.60.

Just to clarify, that is $50.60 for a 20km ride. Wow!

In Sydney, the flag fall is $3.40 and $2.06 per kilometre with a 20% surcharge from 10pm – 6am. Plus, you pay tolls and an extra $2.30 if you book the cab by phone.

So for a 20km night ride that you booked in Sydney (excluding toll charge) it will cost just under $47. Add the 10% sur charge with your credit card and it’s going to cost you $52. Granted, a percentage of the money goes to the taxi company, gas and other charges; taxi drivers working in Sydney on Friday or Saturday night are not hurting for business or money.

According to taxi services, the charges are justified. The issue stems from credit card suppliers having issues with taxi companies and fraud. They charge the taxi industry more than others to use their services and instead of eating the charges or fixing the root problem of needing better security, taxi companies push the charge off on the customer. Unfortunately, the charges are at the discretion of the merchant, so they are completely legally allowed to charge unknowing passengers.

What is Happening Now

On May 18th of this year the Reserve Bank of Australia sat down and looked at the surcharges companies are tacking on to their customers who pay with credit cards. They became concerned that merchants and companies were including credit card fees that were above the reasonable transaction amount, even to the point of profiting from the fees.

On Tuesday, June 12, 2012 the RBA’s Payment Systems Board announced that they will be changing the surcharge regulations and merchants or companies will only be able to charge customers enough to cover the cost of their transaction, rather than profiting from the purchase. The initiative is being picked up by major credit card providers like Visa and Mastercard.

One of the industries that they are honing in on is cab companies and their credit card surcharges. They are asking cab companies to justify where they are getting their charges from and where the money is going to. The final decisions and new regulations will be officially put in place January 1, 2013.

If you hop into a cab in the next few months, make sure you have your cash with you or you might incur these nasty surcharge. But take heart, starting in January 2013 you can hopefully use whatever form of payment you desire and only expect the deserved charges. These new regulations are a victory for the consumer and an impressive push by the RBA.