Credit, debit & prepaid card surcharges

Businesses are banned from charging excessive payment surcharges on credit, debit and prepaid card payments. The ACCC will investigate consumer complaints and take enforcement action where necessary.

Payment surcharges

When you pay a business using certain payment types, for example a credit card, the business incurs costs for processing the payment. These costs are usually paid by the business to its bank. Some businesses include these costs in the price they charge for their goods or services. Others pass the costs on as a payment surcharge.

A payment surcharge is an additional amount charged by a business when you pay for goods or services by one form of payment (e.g. a credit card) rather than another (e.g. cash).

Ban against excessive surcharges

On 25 February 2016 the Competition and Consumer Amendment (Payment Surcharges) Act 2016 became law. It inserted a new part into the CCA banning excessive payment surcharges and provided new powers for the ACCC.

The ban is found in the CCA, and operates in conjunction with a Reserve Bank of Australia (RBA) standard.

The purpose of the ban is to stop businesses from charging payment surcharges that are excessive. That is, from charging a customer more than what it costs the business to process the payment.

A business is not required to impose a payment surcharge, but if it chooses to then it is only allowed to pass on to the customer the costs that the business was charged for accepting payment of that payment type.

The ban applies to all businesses, regardless of their size.

Example

Jenny purchases an airfare through an airline’s online booking system. She wants to pay for the ticket with her Visa credit card.

As part of its agreements with its bank and other payment providers, the airline is charged a total of 1 per cent of the cost of each transaction for accepting payments using Visa credit cards.

The airline is not required to impose a surcharge. If it does it will usually be a percentage figure, although in some cases it might impose a flat fee – however the surcharge must not be excessive for any given transaction.

The airline decides to pass on this cost to Jenny as a payment surcharge on Visa credit card transactions.

If the airline charges Jenny a payment surcharge which is not higher than 1 per cent of the value of her transaction it is not in breach of the ban.

If the airline charges Jenny a payment surcharge which amounts to more than 1 per cent of the value of Jenny’s transaction, then the surcharge is likely to be excessive and likely to breach the ban.

Included and excluded payment types

The Reserve Bank of Australia standard sets out what payment types are covered by the ban.

Covered payment types are:

  • Eftpos (debit and prepaid)
  • MasterCard (credit, debit and prepaid)
  • Visa (credit, debit and prepaid)
  • American Express “companion cards” (American Express cards issued through an Australian financial service provider, rather than directly through American Express).

Those payment types that are not covered by the ban include: BPAY, PayPal, Diners Club cards, American Express cards issued directly by American Express, cash and cheques.

Merchants are still allowed to apply surcharges to payments using BPAY, PayPal, Diners Club and American Express cards if they wish. While these payment surcharges are not subject to the ban, and therefore the ACCC cannot take action if they are excessive, these payment systems may have rules or terms and conditions that seek to limit the surcharges merchants can impose. If you have concerns about a surcharge for paying using one of these systems you should contact that system directly.

The ban does not apply to any payments made for taxi services. Taxi services were excluded from the RBA standard because the industry is already regulated by state and territory regulators.

The ban does not affect the existing requirements for businesses to comply with the Australian Consumer Law provisions relating to false or misleading representations about price, and component pricing. These require businesses to state the total price when presenting prices to consumers and to not make false or misleading claims about their prices.

See: Price displays

Typical surcharge costs

The RBA standard allows businesses to charge their customers a cost-based surcharge on card payments, but any surcharge will be limited to the amount it costs the business to accept that type of card for that transaction. Businesses incur costs when they accept a payment from a customer using a credit card, a debit card or a prepaid card. The level of those costs can vary according to the size of the business and which payment method is used.

The RBA has said that as a guide, payments through the domestic eftpos system (used to process payments from debit cards) are usually quite low. Accepting a Visa or MasterCard debit transaction may cost a business around 0.5 per cent of the transaction value.

Credit cards usually have a higher cost for businesses, and may cost the business up to 1-1.5 per cent for Visa and MasterCard, and between 2-3 per cent for an American Express card payment.

It is important to note that different businesses have different costs of acceptance. Some merchants' costs may be higher than these indicative figures.

If businesses introduce other fees

The ban does not prevent a business from setting its own prices for the goods or services it sells.

A business will usually determine its prices at a level where it covers all its costs, and includes a profit margin.

If a business includes in its prices what it calls a ‘service fee’ or a ‘handling fee’ the ban will apply if those ‘fees’ are payable on some payment methods but not others (e.g. the fees apply when a customer pays with a credit or debit card, but not when the payment method is cash). A business is not able to by-pass the new ban by introducing what is in effect a payment surcharge but calling it something else.

If the fees are not described as a payment surcharge, or something similar, and are payable by the customer regardless of the payment method, then they are unlikely to be a payment surcharge and the ban is unlikely to apply. However, ‘fees’ of any sort which are payable regardless of the payment method need to be included in the advertised total price, so the consumer is aware upfront what the total cost will be. If these fees are added to the advertised price later on, the business may not be complying with its existing obligations under the Australian Consumer Law.

EFTPOS minimums

Businesses don’t have to offer a card payment option for transactions under a certain dollar amount. But if they do, they have to comply with surcharging laws regardless of the cost of the product.

Enforcing the ban

The ACCC is responsible for enforcing the ban. We will investigate complaints relating to excessive payment surcharges and businesses will be required to provide information and documents about their costs of accepting card payments.

If we believe that a business has charged a payment surcharge which is excessive, we can issue an infringement notice to the business, which can result in the payment of a penalty. We can also take court action against the business, seeking pecuniary penalties.

What you should do

Discuss the matter first

If you are not happy with a payment surcharge discuss the matter with the business. Remember, businesses are allowed to charge a payment surcharge, as long as it does not exceed their costs of accepting that payment type.

Pay using a cheaper payment method

If a business charges a payment surcharge, you may be able to avoid it by paying in a different way. Different payment types have different costs of acceptance, so some payment types may attract a smaller surcharge, or no surcharge at all.

If you think you have been charged an excessive payment surcharge

Contact the ACCC

More information

False or misleading claims
Price displays
Payment surcharges

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