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 to your customers in line with Australian Consumer Law provisions.
Let us look at the specific card surcharge laws and the ways you can 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 can only cover fees merchants are paying directly to their acquirer or equivalent payment facilitator, and certain costs directly related to the specific payment card accepted.
Merchants will receive an annual breakdown of average transaction fees – in percentage values – divided into card payment systems regulated by the RBA. It is expected that most merchants will use percentage rates rather than fixed-amount fees as a surcharge.
The Government has given the Australian Competition and Consumer Commission (ACCC) investigative and enforcement powers to ensure merchants follow these rules in order to prevent excessive surcharges.
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:
Eftpos (debit, prepaid)
Visa (credit, debit, prepaid)
Mastercard (credit, debit, prepaid)
American Express ‘companion cards’ (i.e. issued through an Australian payment provider and not directly through Amex)
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 it is advisable you check their terms before setting a higher surcharge for these payments.
These surcharge rules do not apply to taxi drivers, as this industry is already regulated by territory and state authorities.
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 individual 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 would ensure 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 your card transactions mainly incur fixed amounts, but most card transactions cost a percentage rate these days. You could be surcharging excessively if you charged 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 these rates.