2.35% Credit Card Surcharge at Daycare

LCatnap3373 on 29/04/2019 - 08:32

I recently signed my son up at a new daycare.
They require everyone to use direct debit via a company called 'Debit Success'
Debit Success offer a fee-free direct debit, but looking at some reviews of this company I see that they charge a $15 dishonor fee.
Knowing that I'll probably run into that if I select direct debit, I chose to pay my weekly fees via credit card.

Their credit card surcharge (visa/master card) is 2.35%, and their Amex is over 4%.

Thinking this to be a bit excessive (that's about $50 in surcharges a year!) I look up the rules around surcharges.
The ACCC quotes the standards set by the RBA, saying that surcharges can not be more than actual costs and note that this will typically be around 1 ~ 1.5% for Visa.

Am I off-base with my thinking, or is 2.35% actually excessive.
Debit Success isn't a small company - they bill themselves as Australia's largest direct debit service provider.
For a company who's whole business model revolves around processing payments, I'm finding it a little difficult to believe their actual cost to process visa payments is 2.35%

I want to make a complaint, but want to make sure I'm just not being too stingy or being unrealistic - I have no idea what it Visa actually charges to put payments through

General Discussion

Comments

  • Ryanek on 29/04/2019 - 08:45
    +13

    I think there is value in pursuing this further since 2.35% does sound a bit excessive. Doesn't hurt to contact ACCC.

  • orangetrain on 29/04/2019 - 08:50
    +4

    https://mobile.abc.net.au/news/2017-08-31/eftpos-credit-card…

    Confirm in writing the surcharges are their cost?

    Then helpfully report the bank to ACCC?

    You'll find that they may give you exception to dishonour or lower cc rate to satisfy you.

  • holdenmg on 29/04/2019 - 08:55
    +2

    I can see it from their view, they want to outsource the whole thing and probably receive neat reports about arrears and payments.

    It is possible in this Credit Card Fee structure there is even an Admin Fee (or a kickback) to to Child Care Centre which there shouldn't be with Debit Cards.

    Maybe see if you can nominate your Debit Card and if that fails they can default to your Credit Card without penalty.

    • Catnap3373 on 29/04/2019 - 10:01
      +3

      I wouldn't be surprised if there was a kickback to the child care center.
      Under the RAB standards for cc charges, they could charge an 'admin fee' separately and they'd be nothing I could complain about. But if they charge a surcharge then it has to be based on actual costs. So I suspect some shenanigans going on.
      I just filled in the credit card from to get the kid into care and will follow this up separately.

      • holdenmg on 29/04/2019 - 10:11

        You can imagine the spiel/take-up rate if you approached Child Care Centres and offered to take this burden off their hands for little or no nett cost to them.

        Fish in a barrel. :+)

      • bobwokeup on 29/04/2019 - 19:23

        I had a similar experience with Flexischools (canteen orders at the kids school) - they claimed a 2% or thereabouts admin fee on top of the CC fee. I'm like there are no admin fees and getting cash paying parents don't pay a few. Definitely something in it for the school and Flexischools.

  • Yabadabadoo on 29/04/2019 - 09:06

    I have the same issue, I complained to ACCC but no response. Mine doesn't even have a free option. Direct debit is around $1-2 but its per week (and you cant change it) so every one is forced to pay over $50-300 in fees per year. I emailed the billing company and they said it was the day care, the day care said it was the billing company…

    oh how is it $50 per year for you ? that's only around $40 a week in fees ! We pay $235 above the rebate per week ! (sydney though)

    • Catnap3373 on 29/04/2019 - 10:04

      My kid is only attending 2 days a week. For the 6mths till the end of the year I'm estimating that fees minus CCR should come to around $70 a week? Based of that the surcharges come to under $50. Will wait and see what actual figures are.

  • capslock on 29/04/2019 - 09:15
    +3

    When the RBA decided to overhaul the credit card fee system many years ago it was supposed to stop excessive surcharging.

    Well, that worked out really well.

  • Seraphin7 on 29/04/2019 - 09:31
    +1

    I would make a complaint. Card surcharges are a scourge, plain and simple, design to gouge an extra few bucks out of the consumer.

    IMO surcharges should simply be illegal.

    • whooah1979 on 29/04/2019 - 09:43
      +1

      Direct debit is fee free.

      • Catnap3373 on 29/04/2019 - 10:06
        +2

        unless you dont have money in your account, then you're up for a $15 dishonor fee.
        Read some internet reviews of this company charging the dishonor fee even when funds were available

        • whooah1979 on 29/04/2019 - 10:15
          +1

          A dishonour fee is charged when there is insufficient funds in the account to cover the debit. It may be easily avoided by keeping funds in the account.

          • Catnap3373 on 29/04/2019 - 10:19
            +2

            @whooah1979: But being a good ozbarginer I'd hate to miss out on those sweet cc points.

  • oscargamer on 29/04/2019 - 09:42
    +1

    If the centre outsources the payment system to Debit Success, then the cost to the centre is the cost that they are charged (which is legal), which will of course be higher than the 1.5% you are looking at. Not sure you'll win that battle.

    • Catnap3373 on 29/04/2019 - 10:11
      +1

      yeah, this is one thing I'm not sure about.
      If the centre outsources these payments, then the surcharge is coming from Debit Success, not the child care centre?
      I would have expected the centre has nothing to do with processing the actual payments from parents every week, just just receive the funds from Debit Success.

      As I understand the rules, any admin fee can't be lumped into the credit card surcharge. The surcharge must be based on the actual costs of processing the payment only (which would be charged by Visa)

      • oscargamer on 29/04/2019 - 10:14
        +3

        As holdenmg says below (as we do), use the Debit Card linked to our offset account…..

  • Hardicus on 29/04/2019 - 09:55
    +1

    The surcharge cannot exceed the cost of acceptance for the card you are paying with. Unfortunately you have no way of knowing what their cost of acceptance is, and if they are a small provider with a crappy bank contact, it could well cost them that much. Also, as someone in charge of determining the cost of acceptance for my company, there is a lot of grey area and the rules are pretty new. If you think it's excessive, you can report them, but I doubt anything will come of it until an audit is conducted.

  • holdenmg on 29/04/2019 - 09:56

    Just wondering if those with mortgages could use a redraw facility backed by a fee free debt card as a workaround/safety net.

    You could slam the usual Child Care amount straight off your mortgage immediately when you get paid and let the free debit card cover you on fees/interest rates lower than the Credit Card.

    Anyone done the numbers to see if this significantly lessens the mortgage/payback time…

  • Halo375 on 29/04/2019 - 20:38

    It is illegal in VIC not to offer a fee free solution. They’ve given you direct debit - why can’t you maintain your balance? Alternatively see if your bank would provide you a free overdraft facility and you’re covered.

  • kyle on 30/04/2019 - 00:06

    Write to them and say you're concerned about the surcharge percentage.

  • hj0809 on 30/04/2019 - 06:51
    -1

    If you are running your savings balance so tight that you can’t seem to pay for childcare then you really need to sort out your finances.

    • Catnap3373 on 30/04/2019 - 07:33
      +1

      I'm doin' OK thanks. $30K in the mortgage redraw, several $k in an ETF, and I pay off my CC every month. I just don't like leaving a large balance in an everyday transaction account earning 0%.
      Actually, I find this the best way for me to manage my finances. If I see a large balance in my transaction account, I spend it. I prefer putting all the bills on the CC and paying that off each month - I know in my head its really just the same thing, but there's something about having liquid cash that triggers me. Its also why I don't carry cash.
      Am I alone here? I think I will take some of this advice and look at linking a card to my mortgage redraw though

      • kerryww on 30/04/2019 - 09:47
        +1

        I agree everything goes on the ONE credit card - everything - even business expenses. I don't carry cash and leave $25 in my transaction account, just in case I need a few dollars, but that is very rare.

        The whole idea is to pay one bill every month and that covers everything. Then there's no waking up in the middle of the night "Oh shit! I forgot to pay this bill or that bill" Or worse waking up knowing that I've not included enough in my transaction acct. to cover direct debits etc.

        I don't like debit cards or debts from transaction accts. and furthermore giving someone access to my cash is very nerve-racking.

      • bremo on 30/04/2019 - 09:55
        +1

        Not alone mate, I am the same and i'm sure there are plenty others. If you are trying to keep your transaction account slim, and your mortgage redraw allows it, you could set up a scheduled automatic redraw into your transaction account the day before child care is scheduled to come out.

      • bobwokeup on 30/04/2019 - 14:40

        What I do is put all of my money in our offset account and build up that account. I also have a savings account which is the only account I can withdraw money from at an ATM/EFTPOS so if I need cash I have to transfer it from my offset account (same bank so it's instant). I literally have $0 in my savings account and pay all bills from my offset account so I'm maximising the offset. If you see the money and want to spend it then yeah having a small amount in your savings/transactional account is a great idea. I also pay for everything on credit card and same pay it off every month.

  • dimitryp on 30/04/2019 - 11:50

    i'm also in the same boat as OP and would like to know if there's a way to get these fees reduced, they're pretty exorbitant

  • mini2 on 30/04/2019 - 12:25

    Hmm so they offer a fee free direct debit solution but you've opt to use your credit card as a payment source? Visa/Mastercard probably charge them ~1% and I'm sure Debit Success isn't exactly a NFP company so they've got to make their cash outta there somewhere plus GST payable on the whole fee that they levied.

    If I was you, I'd be venting my anger at the childcare for passing through credit card fees as I'm sure they aren't running on a shoe string budget or a NFP.

  • mark12345678910 on 30/04/2019 - 15:42
    +1

    With some in depth knowledge of the child care industry I can comment as follows:

    Debit Success is very closely related to one of the Govt approved child care software management packages. Last year centres using this package were forced to move from another party (Ezidebit) to Debit Success, failing which the software package lost some major functionality. The T&C's the centre had to sign to use Debit Success were, let's just say, weighted strongly in favour of one party.

    I know this caused some concern…to the extent a number of centres contemplated moving/did move away from that particular software package, the move itself a cost burden in the short term…but not long term :)

    As far as 2.35%, yes that's on the high side. Note however that it's supposedly a reflection of the combination of both the bank merchant fee and Debit Success' processing fee - for the smarts and infrastructure to integrate into the software. Given that they tout themselves as a large player, this does seem excessive when compared to rates from other third party providers supplying child care centres - and hence similar risk profile.

    Each centre has the option of absorbing the fees, or passing the fee through. There is no free lunch remember. If the Debit Success fees are not passed on by the centre, on a user pays basis, then the centre needs to anticipate in advance what their Debit Success costs might be…prudence would suggest they would budget on higher costs… just in case. Child care fees would increase by the amount influenced by this new budget item for the centre to maintain profitability, or the case of a NFP, maintain the same service level.

    Of course this inclusive price means those paying their way with a 'fee free' method als carry some of the load of those costing the centre fees.

    Also, to my knowledge there is no provision for the centre to 'load up' the fee. It's a reflection of being dictated too or not exercising (or having) bargaining power with the other party. I absolutely know there are similar vendors to Debit Success who are willing to negotiate.

  • HeWhoKnows on 30/04/2019 - 17:01
    -1

    OPs financial irresponsibilty should not be our concern.

    Whilst I agree that the creditcard surcharge appears to be rather excessive OP should just sign up for the FREE direct debit option and ensure the money is there to cover it. End of story.

    Even the credit card payments work on direct debit…OMG!
    Just get your act together OP!

    Im sure OP would want to ensure that carers are there to watch their child so goes without saying that OP should be just as responsible with ensuring the money is there to cover the payment.

    Otherwise take your child elsewhere!

  • pandadude on 01/06/2019 - 23:52

    Businesses are able to recover surcharge based on cost recovery. They receive a statement once every 3 to 12 months but are only required to reassess the rate once a year for 12 months.

    The rate the ACCC always speaks about is the intercharge fee which is only part of a merchant credit card surcharge.

    Also if you click on the below link under Surcharging - Consumer - Why are merchant allowed to apply payment surcharges? The section clearly states" "premium MasterCard and Visa cards can currently cost many merchants more than 2 per cent".

    The follow fees can be included in the rate which was directly taken from the RBA.
    https://www.rba.gov.au/payments-and-infrastructure/review-of…

    "In addition to the fees paid to the merchant's acquirer or payment facilitator for standard card acceptance services, merchants may include some additional types of costs if they are directly related to accepting that particular card type.

    These are:

    gateway fees paid to a payment service provider
the cost of fraud prevention services paid to an external provider
any terminal costs paid to a provider other than the merchant's acquirer or payments facilitator
fraud-related chargeback fees (but not the cost of any actual chargebacks)
the cost of insuring against forward delivery risk."

    Just looking at bankwest Simple Merchant Plan Fee. at $3000 turnover the monthly fee is $60. That alone is 2%. However, if the merchant only has a customer spend $1000. The fee surcharge can be 6%. Even at the best its 1.5%. This is not including add on fraud prevention or fraud-related charge-back. Please note this is only a newer agreement. Most merchant have older agreement which are likely more expensive.

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