Forget card surcharges, these three invisible fees are costing us more

The RBA’s surprise announcement of a blanket ban on credit and debit card surcharges last week rescues Aussie consumers from $1.2 billion of annual costs – a bit of recompense, perhaps, for holding fire on our rate cut.

Explicit surcharging has been allowed since 2003 but, as price hikes everywhere bite, has become a bigger checkout bug bear. But firstly, there are a couple of things to realise about rules today, because changes won’t come in until July 2026.

Credit: Getty Images

One, all surcharges must be fair and reflective of the actual cost to a merchant. Any blanket “2 per cent on cards” caper is not OK.

Two, if there is no option to pay by cash, explicit surcharges are not allowed. The fee has to be embedded in the cost a customer pays, so keep an eye out for that. But it got me thinking about how else we’re getting secretly slugged.

1. Eating out on special days at restaurants, cafes and bars. Now, let me preface this by saying all the below fees and charges are legal. This includes the Sunday or public holiday surcharge. But the surcharge’s existence must be prominently displayed, and before you order.

Complying businesses will have a sign at the entrance, as well as a visible-at-quick-glance declaration on menus. This surcharge, which is largely to cover additional staff costs on these days, can now be up to 25 per cent. That’s potentially $50 added to a $200 family meal out.

On top of pervasive increases in the price of meals and drinks themselves, it makes you rethink going out on these days. Or at all.

2. Transacting overseas – either on the ground or clicking from your couch. It was more than a decade ago now that foreign exchange fees came to our attention – those annoying extra charges that appear on our card statements when we transact either overseas or with an overseas business.

But with online overseas shopping now so popular, they are a larger deal than ever. They also remain curiously large.

While the average foreign transaction fee is 3 per cent, it can go as high as 5 per cent. And besides this card-issuer fee, payment networks like Visa, Mastercard, and American Express may also charge their own international transaction fees, which can be up to another 1 per cent.

Card surcharges are rarely levied on online purchases, because of the no-cash-no-card-charge rule, but per $100 purchase, you can still easily forgo $4 for, well, nothing.

Various cards now offer foreign-exchange-fee-free transactions. And a new alternative is to maintain a travel money card at all times for overseas purchases. These are purpose-designed debit cards with favourable exchange rates for money pre-loaded onto them in other currencies.

The cost of that exchange is usually not explicit. Instead, it’s built into the conversion rate you get. (Such cards also usually spruik no- or low-cost ATM withdrawals overseas.)

The problem I’ve found with travel cards, especially when you travel, is if you incorrectly estimate what you’ll spend, currency stuck on such a card becomes a conundrum. Do you wait until you next visit that country? Travel card companies pick up a pretty penny if you leave money languishing, in interest.

But you’ll wear a double conversion cost if you instead switch the money again into another currency, maybe Australian dollars. Which brings me to the enormous amount you might not realise you are paying from your superannuation and investments.

3. Investing, whether in or out of super. Hidden trailing commissions on your investments, which came straight out of your fund balance, were banned many years ago now. These were rivers of perennially flowing gold for financial advisers.

But guess what? Asset-based fees were not banned. And if there was an adviser in the mix of any investments, these may lop off the top of your money, too. However, there is another layer of charging we all pay: fund management fees.

These vary significantly depending on the level of management of your investments – or superannuation fund. An average amount would be 1.5 per cent – or $1500 on a $100,000 balance.

Which might be fine … but check, when your super performance for last financial year is released (any day), whether your returns made your fees worth it. If you’re paying more for “highly active” management, are you getting higher returns?

Now, also coming out of your super fund will be insurance premiums, but I generally support these – they’re cheap, and the insurance is a great safety net. You’ll have a default level of life and total and permanent disability insurance. You may also be able to get limited income protection insurance on request.

Hidden fees are a fact of life in our financial system – and you can bet they’re about to be re-hidden when it comes to card purchases. Just never obliviously hand over more than you need.

Nicole Pedersen-McKinnon is the author of How to Get Mortgage-Free Like Me, available at www.nicolessmartmoney.com. Follow Nicole on Facebook, Twitter, and Instagram.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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