Why don’t companies have to provide a “free” payment choice?

Angus Kidman 5 September 2016

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Think big businesses have to accept cash or any other payment method? Think again.

So last week was a good week for travellers: excessive credit card surcharges by airlines have been banned. From now on, airlines can only charge a credit card surcharge for flights that reflects their actual costs (typically 1-3% of the purchase price), rather than a flat fee. You can see what the new airline charges are in our full roundup.

If you want to avoid those surcharges altogether, you do have options. These vary from airline to airline, and can range from using a bank payment method such as BPAY or POLi, or paying with a particular kind of credit or debit card.

All that does raise a related question: are businesses obliged to offer a payment method that doesn't incur surcharges? That issue was put to me last week on Twitter: "Surely the ACCC should step in to force them to give consumers at least one option of avoiding the fees." Unfortunately, it doesn't work like that.

The Australian Competition and Consumer Commission (ACCC) generally shies away from setting any rules around what businesses are allowed to charge. Its role is to ensure that the market is competitive, the theory being that when that happens consumers will always get the best price. It only intervenes when it is clear there has been collusion to keep prices artificially high, or when a provider might be able to exploit a monopoly advantage (as happened last week with Telstra and NBN HFC cables).

In the case of credit card surcharges, the main regulator is the Reserve Bank of Australia, although the ACCC will be able to impose fines on businesses that don't comply with the rules. And the key issue is that what's described as a "credit card surcharge" really isn't one, because the cost bears no relation to what those businesses actually pay to process credit card transactions. That's why there has been an intervention.

That logic also explains why there aren't regulations controlling equally annoying and arbitrary expenses such as "booking fees" for concert tickets. In that context, businesses are allowed to charge what they like.

Finally, it's worth remembering that businesses aren't obliged to offer or accept any payment method, including cash. There's a widespread belief that cash is "legal tender" and any business should accept it, but that's not actually the case. The RBA is very clear on this point:

Australian banknotes and coins do not necessarily have to be used in transactions and refusal to accept payment in legal tender banknotes and coins is not unlawful . . . provider of goods or services is at liberty to set the commercial terms upon which payment will take place.

Most businesses will offer as many payment methods as possible (especially popular options like cash or EFTPOS), because making life difficult for customers is rarely a good strategy. However, they're not obliged to do so, and no regulator is about to make them do so. Them's the breaks.

Angus Kidman's Findings column looks at new developments and research that help you save money, make wise decisions and enjoy your life more. It appears Monday through Friday on finder.com.au.

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