When a retailer charges a surcharge for paying with your credit card do you pause and instead pay using EFTPOS (from your savings account)?
Or do you say “that’s ok” and perhaps think “I want the points”?
One tip that didn’t fit into the Mens Health article was that paying a credit card surcharge is often not worth the reward points.
Credit card surcharges
Most credit card surcharges are over 1% of the transaction amount. So for every $100 you pay at least an extra $1.
In fact the average surcharge is much higher than 1 per cent. According to a East & Partners’ survey reported by the RBA, “in December 2010, the average surcharge for MasterCard credit cards was 1.8 per cent, for Visa it was 1.9 per cent, for American Express it was 2.9 per cent, and for Diners Club it was 4 per cent.”
Value of a Qantas Frequent Flyer reward point
As I mentioned in my earlier article each Qantas frequent flyer point is only worth about 0.69 cents. That reward therefore is equivalent to about a 0.69% discount.
Deciding if you will pay the surcharge
If you earn 1 reward point per dollar and the credit card surcharge is 1% then you are paying an extra dollar and only earning 69 cents back. By paying with your credit card you just lost 31 cents.
If you earn 2 reward points per dollar then the surcharge needs to be less than 1.38% to make it worth handing over your credit card.
At many retailers you’ll need to be earning 3 reward points per dollar to make the surcharge palatable. Points are usually only that high for retailers aligned with the credit card issuer.
Often when faced with a credit card surcharge you are better off handing over your EFTPOS card and paying from your savings account. (That’s better for most people’s budgeting too.)
Next time you go shopping carry both cards with you.