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Ban on excessive card payment surcharges
About the ban on excessive card payment surcharges
Businesses incur costs for processing certain card payment types.
Some businesses include these costs in the prices they charge for their products, like they do for their other costs of running their business. Others pass the costs on as a surcharge for paying with a card.
Certain rules apply when a business applies a surcharge to particular cards including:
- the surcharge must not be more than what it costs the business to process that payment type
- the surcharge can only include costs that are for accepting that payment type. For example, if a business pays an amount for gateway fees for processing credit card transactions only, the business cannot include this cost in its surcharge for debit card transactions.
These costs can vary between businesses. This means that the surcharges charged to customers can also vary between businesses.
Fees that aren’t called surcharges, but really are
A business can’t escape the ban by calling a card payment surcharge something else.
For example, if a business charges a service fee or handling fee that only applies to some payment methods, this is probably a card payment surcharge by another name, so the ban on excessive card payment surcharges applies.
Payments the ban applies to
This ban on excessive payment surcharges applies to:
- Eftpos: debit and prepaid
- MasterCard: credit, debit and prepaid
- Visa: credit, debit and prepaid.
Payments the ban doesn't apply to
The ban doesn't apply to:
- cash
- BPAY
- PayPal
- Diners Club
- American Express
- taxi fares, whatever the payment type.
Concerns about a surcharge that isn't covered by the ban can be reported. You can report:
- BPAY, PayPal, Diners Club and American Express payments to their own complaints handling services
- taxi fare payments to the relevant state or territory taxi industry regulator.
Costs that businesses can include
The Reserve Bank of Australia sets out the costs that businesses can include when determining their costs of accepting payment types. See the RBA Standard No.3 of 2016: Scheme Rules Relating to Merchant Pricing for Credit, Debit and Prepaid Card Transactions (compilation).
Before introducing a payment surcharge, businesses should read our Payment surcharges guide and the Reserve Bank of Australia guidance material. Consumers may also wish to read these guides for further information about how businesses should calculate payment surcharges.
Business costs of accepting payments
Businesses receive monthly and annual statements or similar payment processing information from their bank or payment facilitator. These statements outline the main costs to the business of accepting each payment type, including any service fees their bank or payment facilitator may charge.
These statements may also include card terminal rental and maintenance fees, or other fees the bank or payment facilitator passes on to the business for processing card transactions.
Businesses should check their statements regularly and review the amount of their card payment surcharges, as their costs may change over time.
Businesses should contact their bank or payment facilitator to better understand their costs.
Additional costs
There may be some additional costs that don’t appear on these statements which businesses may include when calculating their card payment surcharges.
These include costs paid to providers other than their bank or payment facilitator, such as gateway fees, terminal fees, fraud prevention costs and costs of specific types of insurance. Businesses need to calculate these costs themselves. Businesses must also be able to verify these costs through contracts, statements or invoices from their providers.
Range of costs for different card payment types
How much it costs a business to process payments can vary depending on the size of the business, the technology used, pricing plan and the payment method. For example, small businesses usually have higher card payment processing costs than large businesses.
The Reserve Bank of Australia’s 2023-24 data shows that the card payment processing costs incurred by businesses are likely to be within the following ranges:
Small business, processing less than $1 million in card transactions a year:
- Debit or eftpos: 0.85% to 2%
- Credit: 1% to 2%
Medium business, processing from $1 million to $100 million in card transactions a year:
- Debit or eftpos 0.25% to 1%
- Credit: 0.75% to 1.5%
Large business, processing over $100 million in card transactions a year:
- Debit or eftpos 0.25% to 0.5%
- Credit: 0.5% to 1%
Some businesses’ costs may fall outside these ranges. The business size is based on the total value of the eftpos, Visa and Mastercard transactions a business processes in a year.
Rules when calculating a card payment surcharge
The lowest surcharge
If a business wants to set the same surcharge for all card payment types, it must not be more than the lowest surcharge they can set for a single card payment type.
Example
A business’s average cost of acceptance for Visa debit is 1% and for Visa credit is 1.5%.
If the business wanted to charge the same level of surcharge for each payment type, it would need to be 1% as that is the lowest of all its card payment types. The business could not average out the costs for both.
Flat fee surcharge
Businesses can use a flat fee rather than a percentage card payment surcharge. However, businesses need to make sure that the surcharge is no more than the lowest amount it costs the business to process each card payment type.
Businesses need to be careful of imposing a flat fee surcharge. Flat fee surcharges can often be higher than what it costs the business to process the payment, especially on low-cost transactions.
Surcharges only for payments below a certain amount
Businesses are allowed to set a minimum amount for card payments.
Businesses can also set a surcharge which only applies for card payments below a certain amount. For example, a 10 cents surcharge for card payments under $10. If a business sets a card payment surcharge in this way, the surcharge must comply with the ban and not be excessive.
Example
If a business’s costs for payments by credit card is 1% and it charges a 1% surcharge for credit card payments, a customer buying a coffee for $5 would pay a 5 cents surcharge.
If the business decided to charge a 50 cents surcharge for all card payments on transactions less than $10 and a customer buys a coffee for $5, that surcharge is a 10% surcharge. This exceeds the business’s cost of acceptance for that transaction.
When payment without a surcharge isn't an option
If there's no way for a consumer to pay without paying a surcharge, the business must include the minimum surcharge payable in the displayed price for its products. This occurs when a business applies a surcharge to all payment types.
If a business chooses to display the price with and without the minimum surcharge payable, they must not display the lower price more prominently than the higher price.
If a business charges different surcharge amounts for different card types, they must clearly display the higher surcharges for other card types.
Example for displaying prices where payment without a surcharge isn’t available and the business charges one surcharge for all card payments
A business charges $5 for a coffee, does not accept cash, and decides to surcharge all card payment methods. The business has checked their costs of accepting each card payment type and has worked out that for a $5 coffee, they can charge:
- a 1% surcharge for debit card payments
- a 2% surcharge for credit card payments.
However, the business has decided to charge the same surcharge for all card types. This means they can only charge the lowest possible surcharge, which for this business is 1%. For the business’s $5 coffee, a 1% surcharge equals 5 cents.
In this scenario, a consumer cannot buy the coffee for $5. The minimum price they can buy the coffee for is $5.05 with the card surcharge.
The price displayed for the coffee must be $5.05.
The business can show this pricing by either clearly displaying:
- the full price with the card surcharge included – $5.05, or
- the full price with the card surcharge included – $5.05 alongside the price of the coffee without the surcharge – $5. However the $5.05 price must be clear and stand out so a consumer can easily notice it as much as the $5 price.
The business cannot display the price for coffee as:
- $5 on its own, because the minimum card surcharge must be included in the displayed price, or
- $5 (card surcharges apply), because the amount of the card surcharge is unclear to consumers.
Example of how the business must display higher surcharges for other card types
The business has now decided to charge the 2% surcharge for credit card purchases. The business still charges the 1% surcharge for debit card purchases.
In this scenario a consumer cannot buy the coffee for $5. The lowest possible price they can buy the coffee for is $5.05 using a debit card. It will cost the consumer 5 cents more to buy the coffee using a credit card. This must be clearly displayed.
The business can show this by either clearly displaying:
- the full price for a coffee as $5.05 with the debit card surcharge included, and $5.10 with the credit card surcharge included, or
- the lowest possible full price for the coffee as $5.05 with the debit card surcharge included, and an extra 5 cents surcharge for credit card payments.
When payment without a surcharge is an option
Where there are other ways for a consumer to pay without paying a surcharge, businesses should still display any surcharges in a prominent way so that consumers are aware of the additional costs for each payment type before booking, ordering or payment.
Penalties for excessive card surcharges or misleading prices
There can be penalties for businesses that charge excessive card payment surcharges, or that mislead consumers about their prices. Find out more about the penalties that may apply.