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Can Businesses Really Charge Me Extra For Paying By Credit Card?

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Mary Holm
Mary Holm


I note with some concern that some businesses add an extra couple of per cent to the price of their products if one chooses to pay by credit card.

I know the business is charged a percentage fee for the credit facility by the bank, and the business is passing on the costs to their 'valued' customers. But as I see it when paying by credit card I am offering the business my bank's guarantee that it will pay the business my money, and for that guarantee the business is charging me more!

I know I have the option of purchasing elsewhere, but if I choose to buy that business's product, and by credit card, then do I have the right to require the business to sell without the credit card fee?


Mary Holm: You can always try. But you might not get far.

It's not against the law to charge extra, "provided the customer knows what is happening before the deal is struck," says Consumers' Institute chief exec David Russell. "The only legal tender in New Zealand is cash. Other payments are by agreement."

He adds that merchants' agreements with credit card companies usually prohibit the merchants from adding an extra charge if a customer uses a credit card, but often that isn't enforced.

"The consumer can contest it. If the trader sticks to their guns, the consumer could get in contact with the card issuer." But are you going to bother?

Alternatively, you could try your argument about offering the business a guarantee. But I don't like your chances of convincing the trader. If a business really valued that guarantee, surely it would offer people a discount for using a credit card, rather than charge more.

So what should you do if a shop charges extra for card use, and you can't find an alternative supplier that doesn't?

Generally, you're better off paying by cash, cheque or EFTPOS, even though you lose the free credit for up to 55 days.

Let's say you're buying an appliance for $1000. If you use your credit card, and time the purchase so it's right after the last date on your billing cycle, you won't have to pay for 55 days.

In a bank, you might earn 6 per cent on that $1000, which comes to $9 over 55 days, or only around $5.50 to $7 after tax, depending on your tax bracket. And if you buy at any other time in the billing cycle you'll get less. The extra charge for using the card will probably eclipse that.

What if your card includes a loyalty scheme?

As a general rule, when you use such a scheme it amounts to getting roughly a 1 to 1.5 per cent discount, says Russell.

If you use the points for flying, it's harder to say, as there is so much variation in fares and programmes.
"Still, generally we say, 'Don't buy air fares or any service or product based on loyalty points. If you get them, treat them as a bonus'," he says.

All in all, it's possible that the free credit plus loyalty points will make it worthwhile to use a credit card even if you pay extra. But the extra would have to be pretty small.


Mary Holm is the author of bestselling books on KiwiSaver and personal finance. She is also a highly praised seminar presenter. Her written advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following that advice. 

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