If you feel like you're being increasingly slugged with surcharges when you make purchases using your debit or credit card, you're not imagining it.
Recent data shows growing numbers of businesses across Australia are charging customers an additional fee when they pay by card, as they deal with rising costs.
There was a 77.5 per cent increase between 2019 and 2022 in the number of in-person payments by credit and debit card that attracted a surcharge, according to
in November.
A
found hospitality venues to be the biggest adopters of surcharges, with 43 per cent of pubs and bars and 42 per cent of cafés and restaurants the company services adding a fee to card payments in May last year.
While 27 per cent of in-person transactions in 2019 were made with cash, by 2022 it had more than halved to just 13 per cent, according to the RBA.
How much are businesses allowed to charge?
When you make a purchase using your card, the business you're buying from incurs costs to process that transaction.
While some choose to absorb the cost, others pass it on to their customers through surcharges.
Under rules set by the RBA and enforced by the Australian Competition and Consumer Commission (ACCC), businesses aren't allowed to add a surcharge that's more than what it costs them to process a specific type of payment.
This ban on excessive payment surcharges applies to payments made via these methods:
- EFTPOS - debit and prepaid
- MasterCard - credit, debit, and prepaid
- Visa - credit, debit, and prepaid
The cost of processing card payments varies between merchants, with smaller businesses tending to face higher bank fees than large ones.
The RBA estimates the average cost of processing different payment methods to be:
- EFTPOS - less than 0.5 per cent
- Visa and Mastercard debit cards - between 0.5 per cent and 1 per cent
- Visa and Mastercard credit cards - between 1 per cent and 1.5 per cent
So if you buy a takeaway coffee for $5, then a 1.5 per cent surcharge on top of that will take the total cost of the transaction to $5.08 (assuming they round up).
For an $11 pint of beer at the pub, the total amount you'll pay with a 1.5 per cent surcharge will be $11.17.
If you order a $45 steak to go with your beer, it will set you back $45.68.
While a 1.5 per cent surcharge may not seem like much when you're buying a coffee, it can soon add up. Source: SBS News
Even businesses that only accept payment by card are allowed to impose a surcharge on their customers, provided the fee is clearly displayed and isn't deemed excessive.
Those that choose to set a flat fee rather than a percentage surcharge need to make sure it is no more than what it costs them to use that payment type.
They are also allowed to set a minimum spend for payment by card.
What forms of payment don't the rules apply to?
The ban on excessive surcharges doesn't apply to:
- BPAY
- PayPal
- Diners Club
- American Express cards issued directly by American Express
- Taxi fares, whatever the payment type
How to avoid card surcharges
The easiest way to avoid any card surcharges is to pay for everything using cash.
If you're not a fan of carrying around cash, you can choose to only buy from businesses that don't charge you to pay by card.
Credit cards, particularly those that offer significant rewards, tend to attract higher surcharges than other payment types, so paying by debit card is your next best option.
FAQs
To date, only two states and one jurisdiction still outlaw the use of credit card surcharges. They are a result of non-qualified transactions of different communications methods.: Connecticut, Massachusetts, and Puerto Rico.
How to avoid paying a surcharge? ›
The easiest way to avoid any card surcharges is to pay for everything using cash. If you're not a fan of carrying around cash, you can choose to only buy from businesses that don't charge you to pay by card.
What is the no surcharge rule? ›
These rules—which are unilaterally or independently adopted by Visa, MasterCard, and Amex—include some or all of the following: (a) The NSR, a business provision that prohibits merchants from imposing additional charges on a consumer who pays with a Visa credit card (in the case of Visa's rule) or a MasterCard credit ...
How are surcharges legal? ›
To begin with, surcharges must be made clear by the merchant prior to a sale. “Signs must be posted at the cash register or point of acceptance,” explained Fortney. “The sign must clearly state that a fee of X% will be added on to any payment made with a credit card at time of the sale.”
Can you dispute a credit card surcharge? ›
To dispute a charge on your credit card bill, you should call the card company and let them know about the problem right away.
In what states is it illegal to surcharge? ›
Q: Where are credit card surcharging and convenience fees illegal? As of January 2023, only two states and one jurisdiction still outlaw the use of credit card surcharges. They are a result of non-qualified transactions of different communications methods.: Connecticut, Massachusetts, and Puerto Rico.
What is a surcharge penalty? ›
Definitions of surcharge. an additional charge (as for items previously omitted or as a penalty for failure to exercise common caution or common skill)
Why do we pay surcharges? ›
Surcharges are normally added to the price of goods and services at the point of sale on behalf of the government. Surcharges allow businesses to indirectly pass costs on to the consumer by listing a charge separately from the cost of the good or service.
Is it illegal to charge a surcharge on a debit card? ›
Because debit card surcharging is illegal for the most part, you may be wondering, “How can I offset costs in another way?” There are a couple of tried and tested ways for merchants to offset the cost of transaction processing fees outside of implementing surcharging.
What is a surcharge waiver? ›
Many Credit Cards offer the fuel surcharge waiver feature. It refers to removing the additional fee typically charged on fuel purchases when using a Credit Card. The cardholder effectively reduces the fuel cost by waiving off this surcharge, usually around 1% to 3% of the transaction value.
The confusion between the two is easy to understand. Surcharges and convenience fees are both additional charges that businesses add to their customers' bills. However, surcharges are added to the transaction amount only when customers choose a credit card as their payment card.
How do you explain surcharges to a customer? ›
Examples of Customer Notifications
For example, a point-of-entry disclosure could read as: “We impose a surcharge on credit cards that is not greater than our cost of acceptance.” In a point-of-sale scenario, your signage might display specific charges, such as: “We impose a surcharge of X% on the transaction.
Are credit surcharges legal? ›
You may only surcharge for the amount of credit card fees. It is illegal to profit from surcharges. While the rate varies from company to company, the absolute maximum amount you may charge is 4% per card brand and state rules. However, some states impose more nuanced caps.
Is it legal to charge a 3% credit card fee? ›
In 1985, California passed a law (Civil Code section 1748.1) that prohibited merchants from adding a surcharge (an extra fee) when customers pay by credit card instead of cash.
Can you pass along credit card fees to customers? ›
There are legal options for passing on credit card fees to customers. Credit card surcharging and cash discounting are two options for passing on fees. Adding a surcharge to credit card payments is not legal in every state, but offering a cash discount is.
Can merchants charge 2% extra on credit card payments? ›
Credit card surcharging
This practice is legal in all but four states — Connecticut, Maine, Massachusetts and Oklahoma — additionally, Colorado caps the surcharge fee at 2%. It is also important to note that surcharging is not allowed for debit cards, even when they are run as a credit transaction.
Is surcharging legal in all states? ›
The broad answer is "most of the time." Surcharging is legal in most U.S. states but prohibited or restricted in a few. Learn some surcharging best practices, such as investigating and following regulations and giving notice to customers and card companies. Most legacy payment methods carry a transaction fee.
Is it legal for a business to charge for using a credit card? ›
The answer is: yes, if your business operates in states where it is legal to do so. As of the time of publishing this, the practice of imposing additional fees on credit card transactions (i.e., credit card surcharges) is prohibited in only three U.S. locations: Connecticut, Massachusetts, and Puerto Rico.
