ACCC confirms excessive payment surcharge ban

Effective 1 September, 2017.

From today, every business across Australia will be banned from charging customers excessive surcharges for using certain types of EFTPOS, Mastercard, Visa and American Express cards to make payments.

The excessive surcharging ban has applied to large businesses since September last year and now extends to all businesses that are either based in Australia or use an Australian bank. The ban does not affect businesses that choose not to apply a surcharge to payments.

The ban restricts the amount a business can charge customers for using an EFTPOS (debit and prepaid), MasterCard (credit, debit and prepaid), Visa (credit, debit and prepaid) and American Express cards issued by Australian banks.

“The good news for consumers is that businesses can now only surcharge what it actually costs them to process card payments, including bank fees and terminal costs. For example, if a business’s cost of acceptance for Visa Credit is 1.5%, consumers can only be charged a surcharge of 1.5% on payments made using a Visa credit card,” ACCC deputy chair Dr Michael Schaper said.

“Our message to business is that you are not allowed to add on any of your own internal costs when calculating what surcharge you will charge customers. The only costs businesses can include are external costs charged to you by your financial provider.”

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

“Our advice for businesses wanting to set a single surcharge regardless of the type of card their customers use is it must be the lowest of all the payment methods. You can’t use an average of all payment methods or you will land yourself in trouble,” Dr Schaper said.

Businesses should have received merchant statements from their financial institutions in July setting out their cost of acceptance for each payment method.

The RBA indicated as a guide that the costs to merchants of accepting payment by debit cards is in the order of 0.5%, by credit card 1-1.5% and for American Express cards around 2-3%. The ACCC has found that some merchants have incurred higher costs than these but any surcharge level imposed by merchants cannot be higher than the costs incurred by them for accepting that payment method.

“If businesses are unsure about their cost of acceptance, they should contact their financial institutions,” Dr Schaper said.

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