Using your credit card often comes with additional costs. That's why you’ll see your latter costing you a little extra if you use your credit card at some cafes.
Not surprisingly, most people loathe credit card surcharges. It might even seem unfair to be penalised as a consumer for choosing one payment method over another. Yet, you’ll find many merchants charge a surcharge on credit card payments costing you up to 1-3 per cent of the transaction value.
So the question might be, why is it that some merchants charge you extra on credit card payments and others don't? And why do you even have to pay a credit card surcharge when paying the merchant for the goods or services in full?
What is a reasonable credit card surcharge?
According to the Australian Competition and Consumer Commission, while it’s legal to charge a credit card surcharge, the surcharge must not exceed what it costs the business to process the payment. Businesses are also not required to charge customers a credit card surcharge. If businesses choose to charge a surcharge, they must ensure that the surcharge amount isn't excessive. Overall, it’s reasonable that merchants charge you for the actual cost they’ll pay for processing the transaction. However, this amount shouldn't include the cost of infrastructure or facilities the merchant purchases to enable credit card payments.
These rules are applicable for the following payment types:
- 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 and not directly through American Express)
Generally, the amount you end up paying as a surcharge will depend on the card you use, where you're shopping and what you're buying. However, you'll mostly see a fee between 1 and 3 per cent.
Some retail and online outlets might also charge a flat or fixed fee on credit card transactions. They still need to ensure this amount is less than the costs they incur when accepting or processing the transaction. If you think a retailer has charged you an excessive surcharge, you may consider filing a complaint with the ACCC.
Also, remember that all retailers must inform you of the surcharge before you pay. This is true whether you're shopping online or in a brick-and-mortar store, irrespective of the amount you spend. You’ll typically see a small sign near the payment processing machine in-store and listed at checkout if shopping online. If you're not informed in advance, you can report them to the Australian Securities and Investment Commission (ASIC).
As a financial expert with a comprehensive understanding of payment systems, consumer protection, and business practices, I aim to shed light on the intricate landscape of credit card surcharges. My expertise is grounded in a thorough examination of financial regulations, industry practices, and consumer rights.
Firstly, the practice of imposing credit card surcharges is a common but often misunderstood aspect of payment transactions. The key lies in discerning why some merchants levy these fees while others abstain. The notion that credit card surcharges are universally despised is well-founded, given that consumers can incur additional costs ranging from 1 to 3 percent of the transaction value.
The Australian Competition and Consumer Commission (ACCC), a regulatory authority in this domain, plays a pivotal role in defining the parameters of permissible credit card surcharges. It underscores the legality of such charges but emphasizes that they must not surpass the actual cost incurred by the business in processing the payment. This restriction ensures that consumers are not unfairly burdened and that businesses do not exploit this practice for additional profit.
Crucially, businesses have the discretion to decide whether to impose a credit card surcharge, but if they choose to do so, they are obligated to maintain a reasonable and proportionate fee. The ACCC guidelines explicitly state that the surcharge amount should reflect the direct cost of processing the transaction and should not encompass expenses related to infrastructure or facilities for enabling credit card payments.
These regulations extend to various payment types, including Eftpos (debit and prepaid), MasterCard (credit, debit, and prepaid), Visa (credit, debit, and prepaid), and American Express "companion cards" issued through Australian financial service providers.
The determination of a reasonable credit card surcharge involves a nuanced consideration of factors such as the type of card used, the merchant's location, and the nature of the purchase. Generally falling within the range of 1 to 3 percent, some merchants may opt for a flat or fixed fee. Importantly, regardless of the approach, the imposed fee should always be less than the actual costs incurred during transaction processing.
Consumer awareness and protection are paramount in this context. All retailers are obliged to inform customers of the impending surcharge before payment, whether in-store or online. This disclosure is typically communicated through small signs near payment processing machines in physical stores and listed at the checkout for online transactions.
Should consumers believe they have been subjected to an excessive surcharge, they are encouraged to file complaints with the ACCC. Transparency and adherence to regulations are critical for fostering a fair and equitable environment in which both businesses and consumers can engage in financial transactions with confidence.
