Painful percentages

Bernard Hickey finds flat fees charged to customers for using credit cards are an egregious rip-off; he bridles at the lack of choice

24th Feb 13, 10:02am by Bernard Hickey

By Bernard Hickey

I went to a barber in Wellington this week and got a surprise when it came time to pay with a credit card - there was a 'processing fee' to pay.

I regularly use my credit card for these sort of day-to-day purchases to get the reward points and some 'free' credit for 55 days, given I pay off our balance in full before any interest is due.

I was about to pay with EFTPOS, but was curious to see how much the fee was because it wasn't stated on the sign. The haircut cost NZ$35 and the processing fee was 87 cents.

Given I'm no 'Rainman', I later used my calculator to work out the fee was 2.5% of the total cost.

That's high, but not too bad, given this barber isn't in a position to negotiate hard with the credit card processing firms.

Credit card industry sources tell me the cost to the barber is around 2%, so this is about fair. Although I have plenty of choices around where I work, I'll go to the barber again. The haircut made me look slightly less ugly and I didn't feel ripped off.

Airlines, taxis and online concert ticket sales are in another league of ripping off their customers with their flat fee credit card charges, which can end up costing 5-10% of the purchase price.

This makes me much grumpier than my visit to the barber, not only because the fee is unfairly high, but because I have no choice.

Anyone buying a return domestic fare online from Air New Zealand with a credit card will pay NZ$8 for a 'card payment fee', which is NZ$4 per flight. Jetstar's 'card payment fee' is NZ$5 per flight or NZ$10 return. For most flights that means the fee is 5-10%, which is vastly higher than the 1% or lower that the airlines pay the credit card companies.

The airlines say the fee simply covers their overall costs of selling tickets online, but that's disingenuous.

The airlines are using this over-charging for credit cards on main-trunk domestic flights to subsidise their less profitable foreign routes and the entire cost of their online sales process. It would be like a hotel charging customers NZ$10 for using power in their rooms that costs the hotel NZ$2, and arguing it only covers the cost of putting lights and power points in the room.

Taxis are just as bad.

Depending on the length of the trip, the flat fees of NZ$2 or more are far north of 5%.

The online concert ticket duopoly of Ticketmaster and Ticketek are even worse, adding on all manner of fees, as well as collecting a commission from the ticket itself.

My main complaint is I have no choice.

The POLi online banking system offered by the airlines is actively discouraged by banks as being unsafe. Using a call centre incurs yet more fees.

These flat fees for credit cards are an egregious rip-off.

Companies wanting to keep their customers happy (or at least not feeling plundered) should do what my barber did and charge a simple percentage which is close to the 1-2% they pay for the service.

----------------------------------------------------------------------------------------

This article first appeared in the Herald on Sunday. It is used here with permission.

We welcome your comments below. If you are not already registered, please register to comment

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

24 Comments

by Wolly | 24th Feb 13, 2:56pm 1361671003

THIRTY FIVE BUCKS......jeez oh dear oh what a splurge....aint you got any snips Bernard...get the kids to do it...do it yourself...

by Gibber | 24th Feb 13, 3:37pm 1361673448

Jeepers

In Chatswood (Sydney North Shore) I could get one for $20 AUD

In Parramatta I can get one for $8AUD

Have to pay cash in both cases.... But.... $35 NZD???

A friend on mine believes NZ is becoming a nation of Hairdressers. If that was the case I'd believe that prices should be coming down.

btw. I'm with Wolly. And I think you are now in an age bracket where a home haircut with a #3 would make you about as pretty as a $35 haircut

Hope there are extra services like a couple of glasses of wine or the like for the $35 cost

The cost of the credit card is not the real story here. ,

by Gummy Bear Hero | 24th Feb 13, 9:44pm 1361695448

Sadly for Bernard , he's left his regular " hairdressers to the stars " in Auckland , Warren & Tarquin don't have a salon in Wellington .......

....... $ 35 for that piffling small top knot ........

You should've got them to charge by the kg , Bernard !

by Bernard Hickey | 25th Feb 13, 8:23am 1361733792

Ha Wolly. Tis true I'm in mourning for Warren and Tarquin.

Good idea to charge by the kilo.

I should have mentioned I hadn't had a haircut since late December so there was quite a bit to be lopped off.

cheers

Bernard

by Bernard Hickey | 25th Feb 13, 8:19am 1361733545

Jeepers

I'm beginning to think you're right about age and the use of the clippers...

cheers

Bernard

by notaneconomist | 25th Feb 13, 11:32am 1361745141

The female cost of heading to the salon is several times more costly. Cut, colour/foils and style range from $130 to $200 and then add some expensive hair products all makes that $35 look cheap.

by Bernard Hickey | 25th Feb 13, 8:20am 1361733624

mist4nz

Did you read the story?

I'm not complaining about what the credit card companies charge. That's about right at 1 to 2%.

It's the massive and misleading markups the airlines and taxis put on that is making me very grumpy.

cheers

Bernard

by iconoclast | 24th Feb 13, 5:49pm 1361681398

Should we be worried about Bernard?

My first reaction to this article was "bulltish", then on reflection, maybe it is so.

About 6 years ago I was increasingly pressed to accept payment by credit card.

Rang ANZ-Visa to get the details required to obtain merchant facilities.

Their first question was how much per year would I put through

Answer. Not a whole heap. Payments would be periodic. Reasonable size though.

ANZ-Visa response was for that amount of business their chop fee-discount would be 10%

Needless to say, I did not proceed. I do not offer credit card facilities.

For overseas payments new clients can use the banking swift-payment system.

For smaller one-off payments we offer pay-pal ... and pay-pal take 5%

So, unless things have changed in a few years I wonder at the 3% for the barber.

But then a sample survey of one makes good copy, and turns into an article.

I'd be surprised if a barber would put through more CC business (in total) than I would have.

Are there any merchants around here who can shed some light?

by Kate | 24th Feb 13, 9:31pm 1361694710

Use a travel agent for your bookings - and pay them cash via an electronic funds transfer. Avoids the surcharge.

by robby217 | 25th Feb 13, 2:45am 1361713516

Only if the TA offers a lower price than online though, how often does that occur?

by Kate | 25th Feb 13, 8:47am 1361735274

I find the cheapest flights online - then send the TA an email with the itinerary I want along with the prices I would pay if I booked online. They have always been able to get exactly those bookings at those prices for me - and sometimes find an alternate that is cheaper.

by Wayne | 25th Feb 13, 8:15am 1361733309

Bought return airfares for my daughter the other day. Cost $64 return and Jetstar wanted $10 credit card fee (that's 15.5% fee on cost of fare). Used Paypal instead. I say airlines are the worst of the lot when it comes to what you're talking about.

by Phil | 25th Feb 13, 9:42am 1361738566

I say airlines are the worst of the lot

Nope. Ticketek are the worst.

You want the tickets posted to you?

That'll cost you.

You want to pick up the tickets at the venue?

That'll cost you.

You want to print the tickets out ON YOUR OWN PRINTER?

That'll cost you.

Scumbags.

by Roger Witherspoon | 25th Feb 13, 10:52am 1361742742

Bernard, Bernard, Bernard. Have you not heard of Cash? Use it or lose it.

by Julz | 25th Feb 13, 11:05am 1361743505

"The airlines say the fee simply covers their overall costs of selling tickets online"

Do they charge for the cost of their adverts, their staff, their fuel? of course not because it's all just the cost of doing business and is in the ticket price. The internet is the cheapest way they have of selling tickets so to change for it is a scam. It's even worse that telling you price and then adding the GST to on as you are paying the bill which I also hate.

It's even worse than telling you price and then adding the GST to on as you are paying the bill which I also hate. It's all just a way of making the ticket price look more competitive so can can lure you in before they hit you with all the hidden charges. It should be illegal to advertise anything other than the all in price, GST and payment charges included.

by Gummy Bear Hero | 25th Feb 13, 1:57pm 1361753873

We were hit with a 3 % charge on using our credit card in the Philippines ...... outfitting our bamboo hut with some furniture ......

..... so we went around the ATM's at the local malls , and drew out the money in 100 peso notes .....

Then back to the furniture store , and we unloaded the bundles onto the desk ........ which wiped the snooty look off assistent's face when the boss told her to count all 670 of them ( $NZ 2000 ! ) .......

....there's ways and means to exact your revenge , friends , ways and means ....

by Christov | 25th Feb 13, 2:54pm 1361757283

GBH....The assistant's snooty disposition was probably more due to just where, you thought you were going to park the "Chaise longue" and Turtle Shell Coffee table in the Bamboo Hut.

by Gummy Bear Hero | 25th Feb 13, 3:00pm 1361757609

..... they're infront of the 48 inch flat screen TV , Count .....

Or should I call her the " count ! " ...... nyuk nyuk , nyahhhhhhhhhh !

by Christov | 25th Feb 13, 3:09pm 1361758173

Well I'm fairly positive while you were visiting those ATM's GBH , you were calling her something like count by way of imperfect homophone.

nyuk nyuk , nyahhhhhhhhhh !....Dick Dasterdly....?

by Christov | 25th Feb 13, 2:32pm 1361755927

$35 Bernard....? Congratulations my man, you are now the victim of your celebrity.

You have made it..! , and all in sundry will expect some kind of justified trickle down for their percieved sense of your fortune.

Bernard inquires of Barber....How much to cut my hair..?

Barber............. $35

Bernard...............how much for a shave..?

Barber...............$18

Bernard..........Shave my Head.

by Gummy Bear Hero | 25th Feb 13, 2:51pm 1361757104

...... for $ 35 you'd think there'd be gold leaf flecked throughout it ......

But he looks just as crummy as we know and love him , don't he !

by Christov | 25th Feb 13, 3:02pm 1361757746

Never forgetting the last four letter word you want to hear from your Barber is.......

OOPS !

What Bernard really needs is a stylist who understands point of difference principals.

I should think in the line of work undertaken , Bernard might well suit an Alphalpha as in the lil raskals Alphalpha, he had a question mark of hair laquered atop his crown to match his inquiring disposition.

by Bernard Hickey | 26th Feb 13, 10:11pm 1361869881

FYI from a reader via email:

Bernard, under the Credit Contracts and Consumer Finance Act you

purchase of hairdressing services using a credit card would be a consumer

credit contract. Therefore any fees which are charged on the contract which

are to be passed onto a third party should be the actual fees which are

charged by that third party .. so the CC company charges 2% to the retailer

and then the retailer is passing on the 2% but calling it 2.5% or whatever

this would be in breach of the CCCFA s45(1) "must not exceed the actual

amount payable" .. as the CC company is levying the fee to the retailer and

then the retailer is putting it back on the customer credit card it is

impossible for the CC company to not know the actual amount of the fee which

is being passed on. From what I can see the CCCFA does cover credit card

purchases because s5 CCCFA interpretation s5(d) refers to a purchase on a

credit card is an advance under the CCFA

by sleepsindoors | 4th Mar 13, 6:22pm 1362374538

So I'm late to the party, but I couldn't let this go uncorrected.

Your hairdresser isn't providing you with credit "under a credit contract", so they're not a "creditor", and your contract with them is not a "credit contract" (s 5 definition "Creditor"; ss 6 and 7 CCCFA).

So your hardresser's not liable under the CCCFA. Under the FTA, for misleading/deceptive conduct? Maybe. I can't be bothered trying to find out. But definitely not the CCCFA.

As an aside, this is why you don't get given a CCCFA disclosure document everytime you use your credit card, which, if your email-correspondent was right, would need to happen under s 17 CCCFA.

Also, I think 2.5% is a decent merchant service fee all things considered, I'd be surprised if a hairdresser could do better.

Also! Before businesses were allowed to surcharge for credit card transactions, what effectively happened was that the merchant service fee got spread across all transactions. Credit card companies collected the merchant service fee and used it to give their card holders bonus points (or whatever). However, only people using credit cards got bonus points. Result: non credit card users were paying for the "bonus points" received by credit card users. It was unfair, and it had to change.