Relief from credit card surcharges could be in sight.

Inflated surcharges charged by airlines, hotels, taxis and other retailers for using a credit card (or debit card) could soon be a thing of the past. The very body that allowed them back in 2003 is having second thoughts. It appears the Reserve Bank may have got it wrong by leaving it up to "market forces" to set surcharge fees.

Put simply, a surcharge is a fee charged by a retailer when a customer chooses to pay by card. Around 30% of merchants impose a surcharge on at least one of the credit cards they accept. Petrol stations are increasingly imposing a fee, especially on Amex cards.

When cardholders use their credit card to buy something, the retailer's bank charges them what's called a merchant service fee (MSF). This fee is supposed to reflect the price that a retailer pays for benefits associated with accepting credit card payments, such as payment guarantees. It also covers other costs such as processing the transaction and the cost of renting the terminal.

According to latest figures from the RBA, the average a retailer pays to have transactions processed by banks is 0.86% for MasterCard and Visa, and 1.89% for American Express. But financial research firm East & Partners suggests consumers pay much more. In December 2010, the average surcharge for MasterCard credit cards was 1.8%, Visa 1.9%, American Express 2.9% and Diners Club 4%. Some merchants - as many as 10% - are applying a surcharge as high as 5% or more.

While the reforms were initially designed to make payment costs more transparent, consumers have known for some time that some retailers see the fee as revenue, rather than covering the cost of the transaction.

How else could you explain a flat $7.70 credit card fee charged by Qantas when booking tickets online, or the Cabcharge scheme where credit card use carries a 10% fee. Flat fees as in the above two cases don't even recognise the different costs among cards.

The RBA's payment system board has proposed either a cap on surcharges or giving card schemes greater power to make rules on excessive surcharges. But this won't be easy, as even the RBA points out. It says: "A cap on surcharges would not necessarily prevent higher prices being passed on in some other way."

It will seek industry feedback on how changes should be applied.

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