We understand that managing card surcharging can be crucial to your business operations. It is essential that you adhere to the rules and regulations when it comes to surcharging your customers. This is to avoid potential penalties and maintain a positive relationship with your customers. This guide sets out an overview of surcharging in Australia. While you should read the underlying rules and regulations directly to understand your obligations and not rely entirely on this guide, it is a good step to understanding surcharging and how it could apply to your business.
What is Surcharging?
The costs incurred as a merchant when accepting payment from a Credit or Debit Card which are passed on to consumers through a fee upon payment is referred to as a “Card Surcharge”. It is optional for the merchant to pass on the incurred costs from card payments. If the merchant chooses to pass on the incurred card fee to the consumer, they can do this through a card surcharge or by including it in the advertised cost of goods or services.
Excessive Surcharging
The Reserve Bank of Australia (RBA) first introduced rules in relation to surcharging in the early 2000s to support competition and efficiency in the payments system. As a merchant, it is crucial to follow these rules to maintain compliance. These rules preserve the right of merchants to impose a surcharge on card payments but limit the amount of any surcharge to what it costs the merchant to accept a card payment. The Australian Competition and Consumer Commission (ACCC) supports these rules and enforces a ban on ‘excessive surcharging’.
The surcharge amount must not exceed the actual cost incurred by you to process the payment. This is your “Cost of Acceptance” (see below for more detail). Surcharging consumers an amount that exceeds your Cost of Acceptance may constitute ‘excessive surcharging’ and can be investigated by the ACCC.
The ACCC has the power to issue ‘Surcharge Information Notices’. These notices will require you to provide specific information or documents, such as evidence of the business' costs of processing a payment, in comparison to the surcharges it is applying, to determine whether or not the surcharges exceed the permitted level.
Note: Regulatory requirements and guidance may change, we have included links below to the ACCC so you can see the latest updates.
Cost of Acceptance
In more detail, the amount it costs you to accept a payment from a particular type of card is your Cost of Acceptance. This applies to Visa, Mastercard and eftpos supported cards. Other payments schemes may contractually include requirements that limit consumer surcharges in addition to the regulated payment cards named above. The ban on excessive surcharging does not apply to BPAY, PayPal, Diners Club, gift cards issued by a store, American Express cards issued directly by American Express, and taxi fares (whatever the payment type) - however, any concerns around these can be reported to ACCC by consumers for review.
To determine the Cost of Acceptance you should refer to your payments service provider monthly/annual statement which will detail the payment costs you are being charged for each card type. To calculate the applicable surcharge amount, refer to the RBA guidance (see link below) on what fees and charges can be included. In general, the surcharge amount will be the costs charged by the payment service provider including:
- merchant service fees;
- terminal fees; and
- any other fees in the processing of card transactions.
Merchants can surcharge any of the cards covered up to the average percentage Cost of Acceptance in their annual statement for that card type.
In addition to fees, merchants may choose to include other relevant costs if these are directly related to the acceptance of card payments and can be documented as evidence of what you have incurred. This may include:
- fraud prevention services; and
- chargeback fees (not the amount of the chargeback transaction).
Card surcharges should be reviewed on an annual basis (on receipt of your annual payments service statement) to ensure these remain accurate.
Tips when calculating a surcharge
- The lowest surcharge is to be used if you want to set the same surcharge for all payment types.
- Flat fee surcharge can be used rather than a percentage surcharge. However, this must be no more than what it costs the business to use that payment type. It also should not be imposed on small cost transactions whereby the fees may be substantial versus the purchase amount.
- Surcharges that only apply for payments below a certain amount is permissible, however the surcharge must comply with the standards and not be excessive.
- When payment without a surcharge isn’t an option, you must include the minimum surcharge payable in the displayed price for your products. This is the case when you don't accept cash payments and apply a surcharge to all card payment types.
It is important to remember that you must display appropriate signage if you choose to impose a surcharge on your customers. The signage must be publicly displayed, showing the percentage or amount of the surcharge on the cards the surcharge applies to.
Useful Links
RBA Information
RBA Questions & Answers: Surcharging
ACCC Information
Visa Merchant Surcharge:
https://www.visa.com.au/about-visa/surcharging-merchants.html
Amex Merchant Surcharge:
https://www.americanexpress.com/au/credit-cards/about-credit-cards/surcharging/