The “tap and go” fee trap: payWave and PayPass exposed

The “tap and go” fee trap: payWave and PayPass exposed

Paying for your fruit and veg at the shops or a late night cab ride has never been easier than with Visa payWave and MasterCard PayPass “tap and go”. While it may be a convenient way to make purchases under $100, did you know you might be slapped an extra premium to simply use the service?

The problem for debit card users is payWave and PayPass “tap and go” use the same processing system as credit card payments, which are subject to fees by Visa, MasterCard or the card provider. So if you use a debit card to “tap and go”, you could find yourself charged a merchant service fee or surcharge.

While major retailers like David Jones generally absorb the fee for both credit and debit card transactions, some merchants are passing this cost on to you, even increasing it to make a profit. Although the Reserve Bank of Australia suggests fees should only cover “the reasonable cost of acceptance” there is no limit to what merchants can charge.

<<UPDATE: 26 July 2016>> Since this blog was published, the Reserve Bank has conducted a review of credit and debit card surcharging and introduced new regulations that mean merchants will only be able to pass on the actual cost of acceptance. These changes will take place after September 1 2016 for large merchants and September 1 2017 for all other merchants. Read more here

Here’s a look at how widely the surcharges vary:

According to the RBA the true cost of processing a credit card transaction is usually only around 0.8% of the purchase price for Visa and MasterCard and 1.8% for American Express and Diners Club.


Free for credit cards, EFTPOS and “tap and go” debit/credit


0.5% on credit cards and “tap and go” debit/credit

Car parks (Westfield)

2.5% on credit cards and “tap and go” debit/credit

Taxis (Cabcharge)

10% on all cards (including EFTPOS)

How can I avoid the “tap and go” merchant service fee?

While it’s legal for a merchant to charge you a surcharge for both credit and debit purchases, they should let you know before putting through the transaction.

Debit card users can generally avoid the merchant service fee by swiping or inserting your plastic into the EFTPOS terminal and selecting ‘savings’ or ‘cheque’ and entering your PIN. It may take longer than the contactless card method but your hard earned cash should be in your pocket not the merchants.

If you’re a regular taxi passenger, the only way around the fee is paying with cold hard cash because cabbies will charge you as much as 10% on ALL card transactions including “tap and go” debit and EFTPOS.

Have you been wrongly stung? Tell us below!

For more information on “tap and go” purchasing, check out Mozo’s payWave and PayPass guide here.

The “tap and go” fee trap: payWave and PayPass exposed was last modified: July 26, 2016 by Rebeccah Elley

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28 Comments - Write a Comment

  1. “According to the RBA the true cost of processing a credit card transaction is usually only around 0.8% of the purchase price for Visa and MasterCard and 1.8% for American Express and Diners Club.”

    The solution is simple: the government should LEGISLATE that all credit card surcharges will be regulated as per RBA figures with enforcement by the ACCC.

    Merchants should only have a choice on whether or not they accept credit cards and NOT on how much they charge if they do. As simple as that.

    If the USA doesn’t have CC surcharges, so should we!

    Mozo has a lot of power in the Australian consumer scene. Why not use this power for good and start a campaign to force the government to legislate and end this rort! We’ll be the first to support it!

  2. Pickles car auction: they have the usual credit card fees but they also charge 1.1% on debit cards and 1.1% on cash! Basically there is no way you can avoid their ‘transaction fee’. Is that legal?

    1. Mozo

      Hi Suzanne,

      From what we are aware it is legal for merchants like Pickles to charge transaction fees, as the Reserve Bank of Australia only states that the charge should be “the reasonable cost of acceptance”. However David Murray’s Financial System Inquiry is suggesting a ban on debit card surcharges and a scaling back of credit card surcharges. So we may see a time when these charges are gone altogether.

  3. About credit surcharges, from what I understand the bank (Visa, Mastercard, Amex…) charge this to the business, the business chooses to either make those that use pay for the service, or “absorb” which really mean making the items higher to cover the cost. Is that fair? Making people who do not use a service pay for the service? As far as I can see when the surcharge only covers what the banks charge (see the real issue, greedy banks) it’s fine.

  4. Paywave/Paypass is heavily pushed by the banks and credit card companies because they make more money on it then standard chq/sav fees (eftpos).

    We (merchant) get charged 4 different rates
    Standard Credit Cards – 0.6% +gst
    PREMIUM credit cards – 1.7% +gst
    Amex cards – 1.98% +gst
    Diners 2.9% + gst

    EFTPOS (when you press chq or sav) – 15cents – no matter the value of transaction. If you card has a daily eftpos limit of $2,000 and you spend that in one transaction. only cost 15cents for eftpos, whereas when you press CREDIT or use paywave we get charged one of the above % fees.

    If business have to obsorb the % – then we would need to put our prices up by 3%.
    Which is not good for cash paying customers or people paying with EFTPOS. That’s unfair.

    If you want convenience and/or to use a credit facility – you should need to pay.

  5. At the Balmoral Cinema complex, when purchasing at the snack counter, the operators only accept paywave or cash. Absolutely refused to swipe my card in the normal way and I was told if I didn’t want to use paywave, I could leave the (huge) queue and go to the nearest ATM to obtain the cash for my $14.00 purchase. Is that legal? I also received a extra 30c charge on my account for agreeing to use the paywave.

    1. Mozo

      Hi Bonnie,

      The situation you described sounds frustrating! But unfortunately it is legal for a merchant to only accept cash or payWave. It’s also legal for them to charge you a surcharge for using the payWave option, as long as they inform you of the cost before putting through the transaction.

  6. My wife used our Debit Card to pay bill ($110) for A/C service. She was advised that there would be a charge for this transaction. We always select CHEQUE and have never been asked to pay a fee on this account. Is this legal? I suppose it’s business that doesn’t want to be in business very much longer.

  7. Some banks (Bendigo is one) charge a transaction fee or count it in the limited number of free transactions you get if you use savings or cheque but not if you select credit.

  8. I often think the “user pays” argument is a bit of a furphy. Businesses have to cover their costs. Uptake of cards in Australia is very high because of the convenience factor. Personally, I have refused three bags while shopping today and did not need the “free” gift wrapping service. Where’s my discount? I’m happy to pay for someone else who finds these services helpful in the price I pay for my purchase and someone else may be subsidising my credit charge. If I buy online from David Jones why should I pay for those of you who want to visit a bricks and mortar shop? All those folk using cash – Who do you think pays the salary of the person filling the machines and how is that reflected in interest rates? The quicker the cashless society comes the better for me. The risk of you being hacked is probably similar to your risk of being mugged for your cash except I can complain of fraudulent use to my bank and get my money back.

  9. Just a note for Australian peeps; ING Direct bank has free ATMs in Australia, and gives you a 2% cash-back for PayPass purchases – so unless you are being charged 10% for the purchase, it may end up being better off and more convenient anyway~

    It’s 2015/10/29, and since the new financial year, I have received $42.50 in ATM refunds and $29.76 in PayPass refunds ~ woo~

  10. NPP (New Payments Platform) will force Card Schemes and Banks and Merchants to revisit the fees and charges. The only incentive (after NPP is implemented by 2018) for people to have credit card is 1-Rewards and points 2-Be able shop and buy with loaned credit/money.

  11. As a retailer I am annoyed about the cunning nature of the banks in regards to pay wave. A customer wants to pay by cheque card and he/she says Oh just paywave. I say do you realise the banks want you to wave as they make money out of me, whereas a savings or cheque account doesn’t cost us as much. Most nice people are ignorant of this greedy bank ploy

    1. Thats why in our store I have asked my bank to disable pay pass.

      Our average sale is $80 and generally eligible for pay pass. About half our customers use savings or cheque.

      If it goes through pay pass the cost is $80*0.80%+GST= 70.4c
      On savings or cheque (Eftpos) the cost is 10c

      60c Difference doesn’t sound like a lot – however it equated to:

      60c x 50 eftpos sales a day is $30 a day in additional fees.
      $30 day x 30 days=$900 a month
      over $10K a year in extra fees.

  12. Just been charged $1.50 for using payWave at a shop that suddenly introduced it. After I queried the charge I was told to shop elsewhere. This is a shop I’ve spent $100 a week in for the last year…so they’ve lost my business. What I don’t like is the attitude that followed my innocent query. This attitude is becoming more and more frequent in Australia.

    1. Chris, I’d be annoyed too and if possible take my business elsewhere. Costs of doing business are just that, costs of doing business. Either absorb the cost or get out of the business. Advertising is also a cost of doing business, something that retailers accept they need to pay for if they want to attract customers. Same with convenience payment methods. If you want to attract customers DO NOT penalise them for their choice on how they pay for goods at your establishment or you’ll soon find they are going elsewhere!

  13. I have come across a couple of retailers that insist on taking my card and pay waving themselves and holding onto the card until the transaction is complete before handing back my card. This makes me feel uneasy as I need to lean over the counter and watch them to make sure they enter the correct amount.

    1. The reason for this is likely that they are waiting for the transaction to finalise before giving you your card back. As a retailer it happened once to me (but never again) and luckily only $10 customer pay waved and walked out store with goods Transaction was slow then actually didn’t finalise, customer no longer in store, I lost $10.

  14. Where are the regulators? Maybe a royal commission into the Banks needs more community support. Bring on a campaign! No I am not a labor supporter but an angry consumer:(

  15. ‘Shopping at woolworths today. My clutch purse passed close to the eftpos machine and it went off. I queried what had happened and the shop assistant said oh don’t worry your card registered with paywave. BUT IT WAS STILL IN MY CLUTCH PURSE AND I only realised what was happening when I heard the beep. Not happy. Any advice…

  16. I’m glad I’ve read this because I keep finding myself confused on what available balance and account balanced meant and why there was an over charge. Now I get it, I’ve been getting money taken off me while I’ve been using payWave. Never using it again thank you

  17. Several times while going to swipe my card I’ve been told “You’ve already paid”. So the very act of reaching out to swipe has triggered the ‘pay & go’ causing a charge. To a pensioner small charges add up quickly. Now I’m trying to hold the card around the side of the machine before swiping.

  18. I was just slugged a surcharge on my eftpos transaction today at my local newsagents

    I think that stinks and I will certainly NOT be going back to that shop unless they reconsider this inconvenient surcharge. Credit Cards I can understand but efptos? really!!


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