Outreageous DCC fee for Emirates flights

[dk4]

Penalising the consumer in no way encourages a merchant to use Australian merchant facilities.
The reality is for many of these multinationals, the consumer has no choice.

Forget multinationals, the real risk for AU banks is if hundreds of thousands of small-medium businesses in Australia realise that it is far cheaper to transact with an overseas provider than a local bank!

 

[jlien]

Forget multinationals, the real risk for AU banks is if hundreds of thousands of small-medium businesses in Australia realise that it is far cheaper to transact with an overseas provider than a local bank!

With all the contempt they show Australians, all I can say is they get what's coming to them.

 

[equus]

So the company may have an Australian address, an ABN, a *.com.au web address, an Australian phone number and charge in A$ etc. But if they process the transaction through a merchant account then its a foreign transaction as far as your local credit card provider is concerned.

Absolutely correct. The status of Paypal is a little different, because they are acting as a payment provider, not selling anything. This act requires them to hold a AFSL to do business in Australia, and they are local. Obviously people can use the US site but the www.paypal.com.au is definitely Australian. Anything about "but they are overseas because I don't get charged GST" is misleading - transaction services such as this are input taxed (I think was the technical definition) and GST is not charged on them. Have you seen GST on your bank account keeping fee?

Whilst unclear, and impossible to see from the consumer perspective, it is possible (and it is a long time now since I worked in this area) that the banks are indeed incurring extra costs from these transactions. The key being the merchant account is overseas. This means that (regardless of the lack of need to perform currency conversions) the settlements between merchant and acquirer involve international settlement via the schemes (Visa / MasterCard etc) and may incur additional costs. Not sure of the current rules, and any provisions to prevent acquires and issuers bypassing scheme settlement, but if they can, there are costs / charges that the banks can avoid (not that the customer or merchant will see the direct benefit of this). As an example, if a customer uses a CBA issued Visa card at a merchant who has a CBA merchant account, if the rules allow, (or the bank plays loose with rules) it is technically feasible for CBA to process this entirely "in-house" and not via Visa at all - saving having to pay Visa their cut. It is quite possible (with the different settlement arrangements) that different fees are payable for locally settled versus international settlements.

Disclaimer: I am no longer current with all the rules, and the above is simply hypothesis based on experience and past knowledge. The use of CBA is purely for the purposes of hypothetical example, and has no significance or relevance to actuality.

 

[equus]

Forget multinationals, the real risk for AU banks is if hundreds of thousands of small-medium businesses in Australia realise that it is far cheaper to transact with an overseas provider than a local bank!

I doubt that is even remotely possible.

Anyone who has had a merchant account will know the credit assessment that goes into getting one. SMB are not going to be able to meet the criteria for overseas banks. They might satisfy Paypal or other such providers - but get a Visa / MasterCard or Amex facility - most unlikely.

When a merchant acquirer provides facilities to a business, they take on significant credit risk. This is not obvious, as you might think that with people paying the money to the merchant, all the acquirer is doing is passing on money and taking their cut - so low risk. The reality is different - and it revolves around the scheme rules and charge backs..

As a consumer, when you pay for something via your card, and don't get it, if you can't get the money back from the merchant, you initiate a charge back via your bank, and they give you your money. This is the protection offered by the schemes, and included in the rules. When your bank processes the charge back, they send it back to the bank that provided the merchant facility to the merchant. So that bank ( by the rules) has to pay the cash back to your bank. They then have to get the cash back from the merchant. This is where they have the credit risk. If the merchant (think Ansett maybe) has sold lots of goods without providing them, when in difficulty, then goes bankrupt - no ability for the merchant acquiring bank to get their money back. The credit risk amounts potentially to the gross amount processed for quite a long period.

The risk to the banks of lots of small businesses being offered merchant facilities by off shore banks is negligible. Really only multi-nationals or companies with operations in those foreign jurisdictions will be able to get merchant facilities there.

 

[Ghostdunks]

I'm not sure if anyone has already mentioned this, but as far as I know, paying by Paypal doesn't seem to trigger this "foreign/overseas transaction fee and I don't think its anything to do with it having a ABN, head office here, or whatever. My case is that I'm actually using a Paypal UK account as I made an account with Paypal while I was living in the UK, and I can't seem to be able to transfer this to Aussie Paypal without completely changing my email address, something I'm not willing to do, so for the past 7 years I've been using my UK Paypal account with aussie credit cards. I have been paying quite a few local bills recently through PostBillpay with Paypal method, using my Westpac Altitude Black credit card and I don't see an extra fee being charged. So I'm not really sure how Paypal does it, perhaps it detects what currency you are paying in(in this case AUD), and then routs the payment through their Aussie processor(?)

 

[TheRealTMA]

I'm not sure if anyone has already mentioned this, but as far as I know, paying by Paypal doesn't seem to trigger this "foreign/overseas transaction fee and I don't think its anything to do with it having a ABN, head office here, or whatever. My case is that I'm actually using a Paypal UK account as I made an account with Paypal while I was living in the UK, and I can't seem to be able to transfer this to Aussie Paypal without completely changing my email address, something I'm not willing to do, so for the past 7 years I've been using my UK Paypal account with aussie credit cards. I have been paying quite a few local bills recently through PostBillpay with Paypal method, using my Westpac Altitude Black credit card and I don't see an extra fee being charged. So I'm not really sure how Paypal does it, perhaps it detects what currency you are paying in(in this case AUD), and then routs the payment through their Aussie processor(?)

This seems to be my understandings as well. I'm looking into paying for Emirates airfares by PayPal in the future but a few C/F fares means one need a large PayPal balance or maybe I just need a higher PayPal/CC limit. Or pay via eCheque I guess. It looks to me like local banks will be losing many million of dollars of business a year once Australian in general wake up to their nefarious and underhanded practice. Or are we all just really that stupid - maybe.

And to update a previous comment of mine, I had forgotten that as a clearing house PayPal have "input credits" so their fees are GST free. Amusing really since all our direct merchant agreements with Amex, Visa etc. attract GST on the fees yet PayPal does not and also manages to charge us a lower fee overall.

 

[jlien]

This seems to be my understandings as well. I'm looking into paying for Emirates airfares by PayPal in the future but a few C/F fares means one need a large PayPal balance or maybe I just need a higher PayPal/CC limit. Or pay via eCheque I guess. It looks to me like local banks will be losing many million of dollars of business a year once Australian in general wake up to their nefarious and underhanded practice. Or are we all just really that stupid - maybe.

Perhaps silly question, but does paying for airfare with paypal still satisfy the requirement for travel insurance on credit cards?

 

[medhead]

Get this for Uber charges to westpac cards.

 

[TheRealTMA]

Interesting question.

 

[TheRealTMA]

Just spoke to Zurich who handle the Earth Black insurance and they said that if you use PayPal links to your credit card to purchase travel through a normal travel bureau / agency / airline etc. and can produce receipts from your CC and PayPal showing the travel purchase, then this is covered by the CC insurance.

 

[moa999]

Have had the same with Uber to my WOW Mastercard

 

[DeKa]

Have had the same with Uber to my WOW Mastercard

So I charge Uber to Citi Sig and earn 4pp$ with no FX fee

 

[Mr_Orange]

Woolies QF Mastercard did this to me for a shirt maker I use that has a .com.au web site and charges in AUD, but are actually a British company. I was told that this company does its banking abroad therefore the forex fees apply. I closed the account!

It seems that this behaviour is becoming more prevalent. Perhaps if goods and services were more reasonably priced in Aus,we would notbe shopping "abroad".