Credit card fees: Excessive surcharges to be banned

The Reserve Bank of Australia is urging business owners and operators to get ready for the ban on excessive credit card fees, to come into effect in January 2013

Taxis, Restaurants, Tourism and e-tailers are the worst offenders of credit card excessive charges

A Reserve Bank of Australia ruling to limit credit card surcharges to a "reasonable cost of card acceptance" will come into force on January 1st 2013.
The RBA had noted a large rise in the number of businesses levying card charges, with taxis, restaurants, tourism operators and e-tailers among the worst offenders.
The RBA says large businesses are the most common surchargers, but the proportion of small businesses that charge for card use has grown from about 4 per cent in 2005 to 25 per cent today.

The National Australia bank already working with Business Owners

NAB's David Gall says business owners will need to speak with their bankers. "Businesses that accept cards need to know what the cost of accepting cards is and the reasonable cost of surcharging," he says.
Processing costs can vary dramatically but are typically between 0.5 per cent and 2 per cent of the transaction cost.
NAB has introduced a more transparent credit card billing approach for its 120,000 business customers and Gall says it has been well received.

 "Merchants now receive a monthly breakdown of the fees charged by card issuers, allowing them to understand exactly how their monthly bill is made up" he says. The RBA will accept submissions about its surcharge plans before Friday. 

 It has received concerns that some businesses are using credit card surcharges to slug customers,rather than recoup the cost of accepting cards.

Credit is off the boil in credit cards to business investment

AUstralian consumers and businesses are reducing their debts for the first time since the last recession, but questions are being raised about whether it is voluntary or enforced by lenders imposing stricter conditions.
Figures collected by the Reserve Bank show the amount of credit outstanding to businesses and consumers fell 0.3per cent in December to just over $1.9trillion - the first monthly fall since 1992 - slowing what was expected to be a steady rise to $2trillion. Outstanding debt has roughly doubled in the past six years.
Corporations are leading the retreat, with demand for finance for new projects drying up and lenders become more cautious about who they lend to. Outstanding loans to business shrank 1.1 per cent in December, reducing the annual growth rate to 8 per cent, down from 24per cent the year before. The Reserve Bank said some of the decrease "reflected a fall in foreign currency-denominated lending".
Other figures released yesterday by the banking watchdog, the Australian Prudential Regulation Authority, and analysed by CommSec showed banks with foreign parent companies such as HSBC, Barclays and ING reduced loans and advances to Australian firms and households in December. All of the big Australian banks, excluding NAB, increased theirs.
The chief economist at Morgan Stanley, Gerard Minack, said the figures showed the credit crunch was beginning to be felt domestically. "More to the point, it will likely get significantly worse. Reduced credit flows is part of the reason I expect a severe recession in Australia.
In particular, tight credit points to a major fall in business investment over the next 18 months."
The credit figures are another sign of a slowing economy, which is expected to convince the Reserve to opt for a 1percentage point interest rate cut at its first meeting of the year next Tuesday.
Meanwhile, housing debt - which accounts for nearly half of all outstanding debt, or nearly $1trillion - continued to grow, albeit at a slower pace than a year ago. The annual growth rate of 7.6per cent was the slowest recorded in more than 25 years.
It shows that while lower interest rates and the first-home-buyers' grant boost may be supporting demand, existing borrowers are seeking to repay debts at a faster rate.
A Commonwealth Bank economist said it was a bad sign for house prices. "This much lower volume of funds trickling into the housing market means that sales volumes will remain anaemic."

Greedy banks raise credit card rates as official cash rate falls

Australian banks are accused of being greedy and taking advantage of the financial crisis and the Rudd Government' s shop message, as they slide up the credit card interest rate by up to 2% as official cash rate falls by a similar amount.

Research has revealed at least five card providers increased their interest rates in the past three months, even though the RBA has slashed the cash rate by 2 per cent since September.
According to financial data company Infochoice, GE Money and Wizard Home Loans had both increased credit card rates by 2 per cent or more since September, when the RBA began its series of rate cuts.
Bank of Queensland, Citigroup and Suncorp had also increased rates on some cards by up to 0.84 per cent.
Crucially, not a single credit card provider passed on the entire two percentage points of official cash-rate cuts announced since September.
Commentators said banks should be put under more pressure to ensure that interest-rate cuts are applied across the range of financial products, so the economy gets as much stimulus as possible.
So far the Federal Government has given away $10.4 billion in a massive financial giveaway, and the RBA has cut rates aggressively, yet part of the benefit of these measures is being wiped out by banks, which are keeping the savings for themselves.
"By not passing on the rate cuts, card companies are doing nothing to alleviate the debt burdens on Australian households so are limiting the effectiveness of monetary policy,'' TD Securities senior analyst Josh Williamson said.
"It could be banks are robbing Peter to pay Paul - using money from credit cards to help subsidise cuts to their mortgage rates.''
With the average credit card rate at just under 20 per cent, borrowers paying over the odds should switch as soon as possible - preferably to a zero per cent deal which will help them pay off the capital quickly.