Credit card surcharges: are they worth paying?

Co-author: Christine Thelander

Many Kiwis love their credit card rewards and, whether your preferred reward is flights, cash or merchandise, flashing the plastic for all purchases can be very tempting. After all, the more you spend on your credit card, the more rewards you’ll accrue, right?

Well that may be true in some cases, but sometimes the cost of accruing those rewards can outweigh the cost of using a credit card rather than a debit card or cash.

think carefully before increasing your credit card limitExample:

It costs businesses money to accept credit card payments and they are able to pass these costs onto their customers, in the form of a credit card surcharge. These surcharges can vary significantly and, some businesses, particularly taxis and airlines, have been accused of levying surcharges far in excess of their costs.

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So, is it worth paying a credit card surcharge to boost your rewards points balance? Or should you reach for cold, hard cash instead?

Credit card surcharges are typically in the range 1-3%, depending on the card scheme. While there might be a few cards whose rate of return will outpace that surcharge, the vast majority of them won’t. You will almost always be better off using another payment method rather than chasing rewards points.

Having said that, there are occasions where it makes sense to pay a credit card surcharge. For example, some credit cards come with an extended warranty cover or merchandise protection insurance.

Even if you’re not looking to change your rewards card, it’s always interesting to see how your card stacks up. The market is constantly changing and you need to be sure you’re not being left behind.

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