How we use cards and digital transactions
The RBA are generally in favour of allowing surcharges, pointing out that they signal to consumers which payment methods offer better value and enable market forces to determine the dominant payment providers. And, this might be true for large purchases, but do we really notice when we’re tapping our phones or watches to grab that morning coffee?
Cards (including debit, prepaid, credit and charge cards) are the most frequently used payment method in Australia, accounting for three-quarters of all consumer payments in 2022.
According to the Australian Banking Association:
· Contactless payments now account for 95% of in-person card transactions, compared to less than 8% in 2010.
· Online payments, as a share of retail payments, have grown from 7% in 2010 to 18% in 2022.
· Mobile wallet (Apple Pay, Google Pay, etc.,) usage has grown from 1% of point-of-sale payments in 2016 to 44% in October 2024.
· Buy Now, Pay Later (BNPL) services, virtually unknown 8 years ago, are now used by nearly a third of Australians.
When are surcharges allowed
In the days before the RBA’s surcharge standard, it was not uncommon for businesses to apply a flat 3% surcharge.
The surcharge rules enable merchants to surcharge consumers for the “reasonable cost of accepting card payments”.
This means:
· A business can only charge a surcharge for paying by card/digital wallet, but the surcharge must not be more than what it costs the business to use that payment type. These costs, measured over a 12 month period, can include gateway costs, terminal costs paid to a provider, and fraud prevention etc., if they relate directly to the card type being surcharged.
o Payment suppliers must provide merchants with a statement at least every 12 months that includes the business’s average percentage cost of accepting each payment type.
· If a business charges a payment surcharge, it must be able to justify how the surcharge fee was calculated.
· If the surcharge applies to all payment types regardless of type, it must not be more than the lowest surcharge set for a single payment type.
· If there is no way for a customer to pay without incurring a surcharge, the business must include the surcharge in the displayed price. That is, if your customer cannot use cash or another payment method that does not incur a surcharge, then the price displayed must include the surcharge.
The RBA estimates that, on average, card fees cost:
| Card type | Fee |
| Eftpos | Less than 0.5% |
| Visa and Mastercard debit | Between 0.5% and 1% |
| Visa and Mastercard credit | Between 1% and 1.5% |
Source: RBA
Excessive surcharging is banned on eftpos, Debit Mastercard, Mastercard Credit, Visa Debit and Visa Credit. The Australian Competition and Consumer Commission (ACCC) reportedly stated that excessive surcharge complaints increased to close to 2,500 in the 18 months from the start of 2023.
Tax on surcharges
If your business charges goods and services tax (GST) on goods or services, then GST should also apply to any surcharge payments made.
