Are EFTPOS surcharges legal? The short answer is yes, but there are some rules around them.
For a start, merchants cannot charge more than what they pay in transaction fees. You can either charge differing amounts in EFTPOS fees or choose a fixed percentage/amount for all card payments.
You also have to be transparent about these fees upfront to your customers in line with Australian Consumer Law provisions.
Let us look at the specific card surcharge laws and the ways to calculate surcharges.
Card surcharge rules
The regulations around surcharges in Australia are fairly strict. The following three rules have been set by the Reserve Bank of Australia (RBA):
Surcharges cannot include general card payment costs like EFTPOS machine rental or merchant contracts applicable to all the card types. The additional costs mentioned in the first rule above refer only to a few things like fraud prevention services and gateway fees for specific card schemes.
These rules also apply to so-called “service fees”, “handling fees” or similar that are clearly a different name for surcharges. ACCC will investigate businesses that disguise excessive surcharges in this way.
Card schemes (such as Visa, Mastercard or American Express) cannot prevent merchants from adding a surcharge intended for recovering the cost of transaction fees, but they can certainly try to make sure the surcharge does not exceed the merchant’s transaction fees.
In Australia, you’re allowed to add a surcharge on any card payment, but the excessive card surcharge ban only applies to the following card systems:
Payment systems not covered by the surcharge restrictions include Diners Club, UnionPay, Amex cards issued directly by American Express, BPAY and PayPal. That being said, these brands may still have their own surcharge rules, so we recommend checking their terms before setting a higher surcharge for them.
The surcharge rules do not apply to taxi drivers, as this industry is already regulated by territory and state authorities.
See also: How does the eftpos system work?
What if the merchant doesn’t give customers a way to avoid surcharges, for example by not accepting cash? If no alternative payment methods are available, and the surcharge on the EFTPOS machine can’t be avoided, merchants must prominently display the full price of goods including the minimum available surcharge. That’s because customers in this case never pay just the product price, so it would be misleading to omit the extra fee.
Essentially, you build the surcharge into the product price, which is what some businesses choose to do anyway to avoid complications.
Setting your surcharge
If the surcharge is limited to the maximum amount you’re paying in card fees, how do you decide what to charge customers as a new business with no history of card payments? And what if you accept several card brands with varying transaction fees?
It’s easiest to charge one fee for all card payments, but then you must limit this rate to the average acceptance cost of the lowest-cost card system. For example, if your average fee is 2.6% for Amex, 1.5% for Visa Credit and 1% for Visa Debit cards, and these are the only cards you accept, your fixed-level surcharge cannot exceed 1% (to match the low Visa Debit rate).
You are not allowed to set one surcharge for all card payments based on the average transaction cost of the card types. For example, even though the average card fee of the above-mentioned Amex, Visa Credit and Visa Debit rates is 1.7%, you can still only charge 1% with one rate for all payments.
It’s important to set your surcharge fees in accordance with regulations.
Alternatively, you can set a different surcharge for each card system, matching the average transaction cost of the individual card systems. This ensures that all transaction costs are covered in full rather than just the level equivalent to the cheapest card system.
What about setting a flat fee instead of a percentage? This could be okay if the card transactions mainly incur fixed amounts, but most cost a percentage rate these days. You could be surcharging excessively by charging 40¢ on top of a $4 coffee (that would be 10% of the product price), which is exactly what the RBA is trying to prevent with the cap on surcharge fees.
New businesses with no history of card payments are allowed to make a reasonable estimate to begin with. After your first statement of card payment fees, you can adjust the surcharge to more accurately match those rates.
One of the least complicated ways to surcharge is to choose an EFTPOS machine with one fixed rate for any card. You would then choose that rate as a surcharge on all card transactions.
