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Retailers told: Stop levying credit card surcharges

These practices are in breach of the contract terms between merchants and acquiring banks, said Visa. -ST
Jessica Lim

Fri, Feb 08, 2013
The Straits Times

SINGAPORE - Retailers who make customers pay more for using credit and debit cards, or impose a minimum spend for such cards, are being told to stop.

These practices are in breach of the contract terms between merchants and acquiring banks, said Visa.

While it is not illegal to impose credit card surcharges, retailers who do so risk losing customers in the long run.

In a survey conducted here last August, Visa found that four in 10 Singaporeans have experienced such practices.

Unlike banks, payment companies like Visa usually do not deal directly with merchants. But in a recent "proactive" bid to clamp down on credit card surcharges, Visa formed a 20-man team to conduct spot checks.

In September and October alone, 63 errant merchants were identified by Visa and subsequently warned by their respective banks. So far, about 40 have stopped imposing card surcharges or minimum-spend conditions.

Visa's country manager for Singapore and Brunei, Ms Ooi Huey Tyng, said card surcharging does not benefit merchants.

Her company's survey showed that a quarter of customers who paid a surcharge would avoid those shops in the future.

Since 1998, the Consumers Association of Singapore (Case) has been urging payment companies and banks to get tougher on retailers who impose conditions for card use. In their view, it is unfair for consumers to shoulder the transaction fees that merchants pay to banks.

But the problem is not easy to unpick.

Said Case's executive director Seah Seng Choon: "The banks want to make card usage conducive, but taking action against retailers would also reduce the number of outlets where their cards are accepted. So they are reluctant to clamp down.

"Credit card companies, on the other hand, worry that such practices will push consumers to pay by cash. This would mean they will lose out too."

A Straits Times check found that minimum spends and surcharges - which typically range from 2 per cent to 5 per cent - are common here.

The Marmalade Toast eatery imposes a $15 minimum spend. CTC Travel levies a $20 to $50 fee for the purchase of air tickets. Teck Yin Soon Chinese Medical Hall in Chinatown tacks on 3 per cent to prices.

Retailers at Sim Lim Square are known to give discounts for cash payments, while budget airlines like Scoot and taxi companies also charge customers extra for using cards.

When contacted, most companies said surcharges are necessary because banks charge them around 3 per cent for each transaction.

A spokesman for Scoot called its surcharge a "convenience fee", which "reflects the higher costs borne by the company as a result of the acquiring bank's merchant charges".

CTC Travel's senior vice-president for marketing and public relations Alicia Seah said her company was aware that card surcharges are in breach of contract terms.

But she said they are necessary because profit margins for each air ticket sold is as low as $30.

Others, like Teck Yin Soon's co-owner Elsie Chua, claimed they did not know card surcharges are not allowed.

Consumers have one recourse: turning to the banks.

"We advise customers to contact us if merchants impose such surcharges," said a DBS spokesman. Investigations will be conducted upon receiving such feedback, he added.

Miss Lucy Sim, 28, who works in the finance industry, agreed that customers like her should not be paying more for the right to use plastic.

"Why should we bear the cost of merchants benefiting from the use of the payment terminals?" she asked.

"I'm sure they get more business out of it too."


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