Buying a coffee and being charged more for paying by card is now a common occurrence. 

While the impost may just be a few cents, surcharge costs add up and contribute to cost-of-living pressures. 

Many restaurants, retailers, and other businesses also apply surcharges, which can be a shock when it comes time to pay.

The reality is that businesses incur costs for processing certain card payment types, and they are legally allowed to recoup those costs. 

However, they must display the surcharge amount. 

The Australian Competition and Consumer Commission (ACCC) regulates how surcharges are applied. The rules are:  

• The surcharge must not be more than the amount it costs the business 
• It can only include costs that are for accepting that particular type of payment. For example, if a business pays gateway fees for processing credit card transactions only, the business cannot include this cost in its debit card transactions. 

How much it costs a business to process a payment depends on the size of the business, the technology used, and the payment method. Small businesses usually have higher processing costs than large businesses. 

Whatever the surcharge, the business must be able to prove the costs they used to calculate it. 

The ACCC says card surcharges should be disclosed to consumers “at the earliest possible point before consumers make their order or purchase”. 

Under the Australian Consumer Law, all businesses must display clear and accurate prices and must not mislead consumers about their prices. 

As a guide, the Reserve Bank of Australia has estimated average costs for different payment types: 

• Eftpos: less than 0.5% 
• Visa and Mastercard debit cards: between 0.5% and 1% 
• Visa and Mastercard credit cards: between 1% and 1.5%. 

To help cut card processing costs, the Reserve Bank has introduced an initiative called least-cost routing, or LCR, which means terminals in businesses will automatically default to the lowest-cost card network to process their debit transactions. 

In theory, this should put downward pressure on payment costs, and the flow-on effect should be smaller surcharges for consumers. 

But the take-up is slow, and payment analysts say the hold-up lies with the banks because they make less money out of LCR. 

The golden way to avoid surcharges is to pay cash. 

While businesses can charge a surcharge for paying with a credit, debit or prepaid card, they can’t charge you more than the advertised price if you’re paying in cash. 

It’s a good way to save, particularly for larger purchases. For example, avoiding a surcharge of 1% by paying in cash, saves $10 on a $1,000 purchase. 

National Seniors Australia wants to keep it that way, despite pressure from some banks and retailers to go cashless. You can read more about the Keep Cash campaign here. 

For bills and other scheduled payments, paying via bank transfer or BPay may help avoid extra fees. 

Using the lower-cost eftpos system can help reduce card surcharges. To do this, swipe or insert the card and pay using the “savings” option.  

Businesses can still add a surcharge for eftpos payments, but it should be lower than for other cards. 

Some bank cards can use eftpos when tapped rather than Visa/Mastercard's more expensive system, which can reduce surcharges without the need for inserting your card. 

You can also change the settings in your phone’s digital wallet to use eftpos for tap payments.  

The ACCC suggests first contacting the business to try to resolve the problem or lodge a complaint with the fair-trading body in your state or territory. 

You can also report an excessive surcharge to the ACCC, which has the power to issue infringement notices and other penalties. 

However, the ACCC is not a complaints-handling body and does not resolve disputes between customers and business owners. 

 

Related reading: ACCC, ABC, NSA, RBA