ATO (tax office) payments by credit card

[Jack_OC]

It's interesting that the credit card companies seem to react negatively to putting your card into credit. Seeing as doing so gives them extra cash, reducing the amount of money they have to borrow at any given time. That's pretty much the idea of paying interest on deposit accounts - to encourage people to give their money to the bank!

The 28 degree card will sometimes be cancelled if you go into credit (for use as a fee free card overseas) more often than if used as a normal credit card.

I suspect the reason for this is that the 28 Degrees card aims to make a reasonable portion of their profit through people paying interest. A card with no annual fee, no currency conversion fees and no international transaction fees needs to have some other means of boosting profits, especially since it's generally not a card that people will put a large amount of spend on - hence they won't make much in transaction fees either. This card is aimed at people going on holiday overseas, who often spend a bit more than they expected/planned to do, so come back with a credit card bill they can't pay off straight away. So in this case, I suspect it's just that they don't want you as a customer if there is not at least a possibility that you might end up paying interest (and if you're never going into debit at all, then clearly you're never going to pay interest).

I don't think the same logic applies to the premium cards, which have high annual fees, high international transaction fees and in many cases currency conversion fees (or unfavourable rates). Those cards are clearly aimed at people who have relatively high incomes and who want to maximise points earn, and those people are generally not failing to pay off their balance each month.

 

[EvanC]

I suspect the reason for this is that the 28 Degrees card aims to make a reasonable portion of their profit through people paying interest. A card with no annual fee, no currency conversion fees and no international transaction fees needs to have some other means of boosting profits, especially since it's generally not a card that people will put a large amount of spend on - hence they won't make much in transaction fees either. This card is aimed at people going on holiday overseas, who often spend a bit more than they expected/planned to do, so come back with a credit card bill they can't pay off straight away. So in this case, I suspect it's just that they don't want you as a customer if there is not at least a possibility that you might end up paying interest (and if you're never going into debit at all, then clearly you're never going to pay interest).

I guess it's like the Kogan mobile dealio not long ago. They offer you a great deal, but only want you as a customer if you utilise that deal in such a way that works in their favour.

 

[Pushka]

It sure isn't a card to use for paying a tax bill. But for OS transactions its a gem.

 

[burmans]

Really?, you can't see why paying into credit, in order to pay a bill, in order to receive points could be regarded as abuse?
If you can afford to pay the card into credit, then why use a credit card to pay the bill? Why not just pay the bill from your money?

At least when you pay up to your limit and wait for the money to be paid by your due date, you gain something for cash-flow or interest issues, but if you're paying the money up front, you don't even have that.

If someone has a $50K limit, but can afford to pay $200K in tax, and pays the card into credit to do it, I, personally, am not surprised that providers could see that as abuse. That's just me though.

I think the word abuse is an emotive term used by people without a lot of emotion when it comes to their customers so no, really I'm not inclined to accept their framing of the discussion. In my book if you are acting within the T&C's it's not abuse.

The fact that the banks and other commercial organisation all think it's perfectly OK to make money off us (that's just business) but regard savvy customers as "abusing" the system is just their attempt to frame the discussion on their terms. If you're happy for them to set the terms, even when they are too lazy to actually get the T&C's right feel free.

In the meantime, in an environment where the banks hold the upper hand in setting the T&C's and I find a way to not be scrwed quite so much under those T&C's I'm happy to use it. Indidentally that's also the way most regulators think too, if organisations set T&C's they also have to abide by them. It's not a tool only to be enforced on the public, its a two way agreement.

 

[Beta4Me]

I guess it's like the Kogan mobile dealio not long ago. They offer you a great deal, but only want you as a customer if you utilise that deal in such a way that works in their favour.

That was ISPone's fault not Kogan's. From experience dealing with the former, they are a bunch of cough.

 

[sumthinfornuthin]

Okay, so my partner received the dreaded WOW cut-up-your card letter today. I obviously pushed it too hard, despite all the warnings on this thread

Not to worry, was good while it lasted. At least they posted all the points from last months transactions. I still have my card, but might tread a bit lighter from here...

What monthly spend ???

 

[shifty]

At present there is a special "government bodies" category in both Visa and Mastercard's merchant fee schedules (0.33% fee, IIRC), so to do so, at least for Visa/MC, would mean changing their merchant fee for all government bodies or creating a special merchant fee category just for the ATO.

If anyone is interested, the aforementioned merchant fee schedules are on the public record (available on Visa / MC websites respectively) - Google it. They list all the different categories and amounts of merchant fees, right from ones for specific types of merchant (e.g. government, education, charities) up to ones for different types of cards for normal businesses (e.g. standard vs premium (e.g. Platinum) vs super-premium (e.g. Signature / World / Infinite)).

Hmmm, thats not quite true. What you are referring to are interchange rates (not merchant fees).

The interchange rate is what an acquirer pays to an issuer. It's a complex matrix when you take into account institution types and card types.

The acquirer is charging a merchant fee to their customer (the customer negotiates that fee. eg. not published).

The main profit/loss the acquirer makes is the difference between what it collects as a merchant fee from the merchant and what it pays as an interchange fee to a card issuer.

The main profit/loss a card issuer makes (of a rewards card) is the difference between what it collects as an interchange fee from the acquirer and what it pays for customer rewards eg. airline points, insurances etc.

I say main profit/loss as there are obviously other components to it, and what I mean by this is let's say 70% of the net result.

 

[pangwen]

Hmmm, thats not quite true. What you are referring to are interchange rates (not merchant fees).

The interchange rate is what an acquirer pays to an issuer. It's a complex matrix when you take into account institution types and card types.

The acquirer is charging a merchant fee to their customer (the customer negotiates that fee. eg. not published).

The main profit/loss the acquirer makes is the difference between what it collects as a merchant fee from the merchant and what it pays as an interchange fee to a card issuer.

The main profit/loss a card issuer makes (of a rewards card) is the difference between what it collects as an interchange fee from the acquirer and what it pays for customer rewards eg. airline points, insurances etc.

I say main profit/loss as there are obviously other components to it, and what I mean by this is let's say 70% of the net result.

As I am not very literate with the credit card industry jargon, could you see if my read of your words is correct?

If we go with the ol' Citi Select paying the ATO:

Acquirer = Visa
Customer = ATO
Card Issuer = Citibank

Merchant fee is what Visa Charges the ATO (unknown, likely to be >0.33%).
Interchange fee is what Citibank gets from Visa from us using the card at the ATO (0.33% according to the schedule, if it's regarded as a government entity)
Visa's profit = Merchant fee - Interchange fee
Citibank's (main) profit from this transaction = Interchange fee - cost of rewards points (+ other things like annual fee - other things like funding the interest free period)

If the above is correct, it pretty much means Citi wouldn't have made much profit (if any) from the ATO..

 

[Jack_OC]

If the above is correct, it pretty much means Citi wouldn't have made much profit (if any) from the ATO..

But not making much profit off specific transactions is no problem if the card is otherwise profitable. Even if the profit margin is tiny, it still means that the more the customer spends, the more the card issuer makes. And even if the transactions are basically cost neutral, who cares? That's actually the same outcome in terms of cost as making the card non viable for ATO transactions, but of course one option keeps customers happy and the other doesn't. This equation only changes if the card provider actually makes a loss on each ATO transaction.

Of course it is more likely that Citi were making a loss than any other provider, as they were awarding at least twice as many points as any other non-QFF Visa or MC card. And given the general behaviour of Citi towards Select customers, I'm starting to wonder if they're actually making a loss on this product across the board and are basically trying to shut it down.

 

[Pukka]

But not making much profit off specific transactions is no problem if the card is otherwise profitable. Even if the profit margin is tiny, it still means that the more the customer spends, the more the card issuer makes. And even if the transactions are basically cost neutral, who cares? That's actually the same outcome in terms of cost as making the card non viable for ATO transactions, but of course one option keeps customers happy and the other doesn't. This equation only changes if the card provider actually makes a loss on each ATO transaction.

Of course it is more likely that Citi were making a loss than any other provider, as they were awarding at least twice as many points as any other non-QFF Visa or MC card. And given the general behaviour of Citi towards Select customers, I'm starting to wonder if they're actually making a loss on this product across the board and are basically trying to shut it down.

I agree they should look at the customer as a whole which is why I think Amex's new ( well actually its now pretty old)points scheme is a big mistake. I was putting hundreds of thousands through the charge card each year, then came the enhancements and I now hardly use it at all so they've lost everything not just the ATO

I would love to know what the net result of the enhancements was to their bottom line.

 

[shifty]

As I am not very literate with the credit card industry jargon, could you see if my read of your words is correct?

If we go with the ol' Citi Select paying the ATO:

Acquirer = Visa
Customer = ATO
Card Issuer = Citibank

Merchant fee is what Visa Charges the ATO (unknown, likely to be >0.33%).
Interchange fee is what Citibank gets from Visa from us using the card at the ATO (0.33% according to the schedule, if it's regarded as a government entity)
Visa's profit = Merchant fee - Interchange fee
Citibank's (main) profit from this transaction = Interchange fee - cost of rewards points (+ other things like annual fee - other things like funding the interest free period)

If the above is correct, it pretty much means Citi wouldn't have made much profit (if any) from the ATO..

In your example:

acquirer = the ATO's merchant provider (eg. a bank, possibly the RBA in the ATO's case - I have no idea)
Customer (merchant) = ATO
Issuer = Citibank
Card Type = Standard, Premium etc.

I am not sure, if the acquirer would pay the lower gov rate or the fact that someone uses a premium card overrides the low rate, and the acquirer has to pay the premium card rate to the issuer. I suspect that it would be the later, as by way of example in my business' merchant facilities we pay as a merchant fee to our acquirer a rate of a percentage + card type based on the interchange rates. Eg. If someone uses a premium card we get charged more than a standard or debit transaction etc. not the normal .33 that my business code falls into.

So the issuer would always be attracting the higher rate if its a premium card, allowing them to pay for the associated rewards. I see the looser as the acquirer if they are not charging the ATO enough in merchant fees.

But I must admit I do not know how the blend of industry type and card type works in regards to determining the fee from the acquirer to the issuer except in my business example, eg. if it is the higher, lower or blend of the industry type and card type.

Either way the issuers make money, they should stop whinging. All it takes is for someone to not make full payment on the balance and the high interest rates pays for all the points!

But I guess it's like everything in life - the old 80/20 rule. 20% of us make up 80% of their rewards cost, so they try to eliminate us...

 

[shifty]

I agree they should look at the customer as a whole which is why I think Amex's new ( well actually its now pretty old)points scheme is a big mistake. I was putting hundreds of thousands through the charge card each year, then came the enhancements and I now hardly use it at all so they've lost everything not just the ATO

I would love to know what the net result of the enhancements was to their bottom line.

I second that.

 

[Pukka]

Either way the issuers make money, they should stop whinging. All it takes is for someone to not make full payment on the balance and the high interest rates pays for all the points!

I got stung by CBA a few months ago, I underpaid by under $1000 on a $45000 bill ( so paid back about $44100) in one month and was charged just under $1000 interest because they average the balance on the whole month when calculating the interest.

It was just a stupid error on my part but what can you do just suck it up, learn a lesson and move on

 

[shifty]

Either way the issuers make money, they should stop whinging. All it takes is for someone to not make full payment on the balance and the high interest rates pays for all the points!

I got stung by CBA a few months ago, I underpaid by under $1000 on a $45000 bill ( so paid back about $44100) in one month and was charged just under $1000 interest because they average the balance on the whole month when calculating the interest.

It was just a stupid error on my part but what can you do just suck it up, learn a lesson and move on

Exactly. I did the same not long ago and got stung by NAB, and learnt its leveraged on the whole balance the hard way as well. I have now setup alerts to remind me to check. They make cash, don't worry about that!

 

[Deleted User]

they are all greedy ba$tards, but at least with competition there is someone always looking to undercut, hence "good deals" become available. Being a member in this forum allows these good deals to be shared.

In the end it all comes down to, if you can save money and earn cheap FF points, then keep the card...if not cut up card and move on

 

[Deleted User]

Either way the issuers make money, they should stop whinging. All it takes is for someone to not make full payment on the balance and the high interest rates pays for all the points!

I got stung by CBA a few months ago, I underpaid by under $1000 on a $45000 bill ( so paid back about $44100) in one month and was charged just under $1000 interest because they average the balance on the whole month when calculating the interest.

It was just a stupid error on my part but what can you do just suck it up, learn a lesson and move on

I got stung with the QEDRCC by the tune of around $500, not a pleasant experience for making a small payment mistake (swapped two numbers around) the payment was short by less than a hundred dollars...

From that point forward I refused to use the card for a few months, told them this, of course they couldn't care...I also complain every year and peg back the $500 in $89 increments... which I intend on doing for another three years

 

[cove]

Yes I have not been tempted to pay off my credit card with minimum payments. A recent note on my credit card statement let me know that the account would get fully repaid just before my 114th birthday.

 

[Pushka]

Yes I have not been tempted to pay off my credit card with minimum payments. A recent note on my credit card statement let me know that the account would get fully repaid just before my 114th birthday.

Everyone needs a long term goal!

 

[cove]

I realise now that I may have become just a little bit too warped by js and this thread. Not sure if there is any cure?? Unfortunately I blasted through my 2013 goal helped by the flood levy and the medicare levy that are both uncapped. Amex will remember me that's for sure!

 

[asg29e]

Yes I have not been tempted to pay off my credit card with minimum payments. A recent note on my credit card statement let me know that the account would get fully repaid just before my 114th birthday.

I can trump that. 137th birthday for me.