New ban on excessive payment surcharges

As of 1 September 2017, Australian businesses are banned from charging customers excessive surcharges for using EFTPOS, Visa, Mastercard and American Express cards to make payments.

The ban restricts businesses from charging customers surcharges that are higher than ‘cost of acceptance.’ Cost of acceptance is what it costs the business to process a payment, such as bank fees and terminal cost, but excludes internal costs such as wages and utilities.

This means businesses can only charge customers what it actually costs them to process card payments. For example, if a business’ cost of acceptance for Visa credit is 1.5 per cent, customers can only be charged a surcharge of 1.5 per cent on payments made using a Visa credit card.

For businesses that want to set a single surcharge across multiple payment methods, the level of the lowest cost method must be used, not an average. For example, if a business’s cost of acceptance for Visa Debit is 1 per cent, 1.5 per cent for Visa Credit, and American Express is 2.5 per cent, the single surcharge would be 1 per cent as that is the lowest of all payment methods.

The Reserve Bank indicated as a guide that the costs to merchants of accepting payments by debit cards is in the order of 0.5 per cent, by credit card 1-1.5 per cent and for American Express cards around 2-3 per cent.

Businesses are advised to contact their financial institutions if they are unsure about their cost of acceptance.

The ban does not include BPAY, PayPal, Diners Club cards, American Express cards issued directly by American Express, cash and cheques.

The ACCC is responsible for enforcing the ban and will investigate complaints relating to excessive payment surcharges. If the ACCC believes a business has breached the ban, an infringement notice will be issued or court action against the business will be taken.

Cristy Houghton