It's Official: Excessive Card Surcharges Are Banned From Today In Australia

Image: iStock

Sick of getting slugged with huge surcharges for paying with card? Well, from today all businesses in Australia are officially banned from charging customers too much for EFTPOS, Mastercard, Visa and American Express payments.

The excessive surcharging ban has applied to large businesses since September last year, and now extends to all businesses that are either based in Australia or use an Australian bank. The ban does not affect businesses that choose not to apply a surcharge to payments.

The ban restricts the amount a business can charge customers for using an EFTPOS (debit and prepaid), MasterCard (credit, debit and prepaid), Visa (credit, debit and prepaid) and American Express cards issued by Australian banks.

"The good news for consumers is that businesses can now only surcharge what it actually costs them to process card payments, including bank fees and terminal costs. For example, if a business's cost of acceptance for Visa Credit is 1.5 per cent, consumers can only be charged a surcharge of 1.5 per cent on payments made using a Visa credit card," ACCC Deputy Chair Dr Michael Schaper said.

"Our message to business is that you are not allowed to add on any of your own internal costs when calculating what surcharge you will charge customers. The only costs businesses can include are external costs charged to you by your financial provider."

New Law Passes To Crack Down On Excessive Credit Card Surcharges

The days of companies charging ridiculous amounts of surcharges just because customers are paying with plastic are coming to an end. The Federal Government has passed a bill that will give the Australian Competition and Consumer Commission (ACCC) the power to rein in companies that slug customers with a high fee when they pay with their credit cards. Here's what you need to know.

Read more

If businesses want to set a single surcharge across multiple payment methods, the surcharge must be set at the level of the lowest cost method, not an average.

For example, if a business's cost of acceptance for Visa Debit is 1 per cent, for Visa Credit is 1.5 per cent, and for American Express is 2.5 per cent, the single surcharge would be 1 per cent as that is the lowest of all payment methods.

"Our advice for businesses wanting to set a single surcharge regardless of the type of card their customers use is it must be the lowest of all the payment methods. You can't use an average of all payment methods or you will land yourself in trouble," Dr Schaper said.

Businesses should have received merchant statements from their financial institutions in July setting out their cost of acceptance for each payment method.

The RBA indicated as a guide that the costs to merchants of accepting payment by debit cards is in the order of 0.5 per cent, by credit card 1-1.5 per cent and for American Express cards around 2-3 per cent. The ACCC has found that some merchants have incurred higher costs than these but any surcharge level imposed by merchants cannot be higher than the costs incurred by them for accepting that payment method.

"If businesses are unsure about their cost of acceptance, they should contact their financial institutions," Dr Schaper said.

The ACCC has been given new powers to enforce the ban.

Payment types that are not covered by the ban include BPAY, PayPal, Diners Club cards, American Express cards issued directly by American Express, cash and cheques.

WATCH MORE: Tech & Finance News

Comments

    This is long overdue, but I do feel sorry for merchants who haven't been ripping customers off.

    It's not really possible to know what charge a merchant will have to pay on a credit card transaction, even if you know it's a visa or a MasterCard.

    The charge on a card changes depending on the card itself. Some Visa cards cost 1.5%, others .89% and so on. It is based on the card and the features of the card. People with cards that have rewards schemes effectively charge the businesses they buy from a higher rate.

    If a business charges 1.5% on every transaction, they'll be collecting more from many people than they are being charged. If they charge .8%, they'll be losing out.

    The banks should also be required to set a flat charge on each credit card regardless of features and stop using merchants to fund them.

    Can't you tell us how much each card costs? Or does it differ based on the amount you spend?

      It depends on the brand and version of the card. You know how you can choose between a VISA with a low interest rate, or one with a higher interest rate but lots of rewards, or one with travel insurance, and so on? Well they all have different charges, which a merchant has to pay. The charge is based on which particular version of the card a customer has! And merchants don't know what the charge is until they see their statement.

    Would this apply to a vending machine that charges an extra 25c to tap/PayWave/PayPass a payment?

    There is no surcharge at this machine when you insert or swipe your card.

Join the discussion!

Trending Stories Right Now