When you use your credit card (Visa, Mastercard, Diners or American Express) to pay for goods or services, the retailer pays a % of that sale to their bank. Fees vary between 1% and 5%. Arrangements between the card companies and the banks prevented retailers from directly passing on that fee - it was absorbed as business expense by the retailer and factored into the prices it charged. So all consumers pay higher prices regardless of the payment method used.
Credit card surcharges are not the same as the foreign currency service fees that you incur when you use your (New Zealand Dollar) credit card to pay for goods or services charged in another currency. The Commerce Commission prosecuted the banks and card companies in 2007 for not disclosing to customers these fees.
Most retailers have Merchant Account with their bank which permits them to accept credit cards. For the vast majority of retailers in New Zealand this Agreement prohibited the retailer from charging the customer a 'surcharge' for paying with a credit card. However there were exceptions that allowed retailers to charge other fees such as 'administrative' charges. The ability to now explicitly surcharge customers who pay with a credit card has come about following changes introduced by Visa and Mastercard and the major banks. This followed action by the Commerce Commission which investigated anti-competitive arrangements between the banks on the fees they charged to retailers for the card transactions.
The Commerce commission estimates that as a result of the new competition between banks and the reduction in mercheant service fees, that retailers should save about $70-80million over the next three years.
