Farewell excessive credit card surcharges: Ban to kick in on September 1st

Australian cardholders rejoice - as of September 1st (tomorrow) small businesses across the country will no longer be able to hit customers with ‘excessive’ surcharges for purchases made with most debit and credit cards.

The surcharge ban on small businesses comes a year after big businesses were prohibited from the practice, and means that customers will now only be charged the true cost of processing card transactions.

“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,” said ACCC Deputy Chair Dr Michael Schaper. 

“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.”

Australians with EFTPOS cards (debit and prepaid), MasterCard cards (prepaid, debit and credit), Visa cards (prepaid, debit and credit) and American Express cards that are issued by an Australian bank will all be covered under the new ban.

However, businesses will still be able to impose above-cost surcharges on American Express cards issued directly by American Express as well as Diners Club cards and other forms of payment including BPAY, Paypal, cash and cheque.

While American Express cards not issued by an Australian bank won’t be covered by the ban, the global provider has taken steps of its own in recent months to decrease the fees paid by small businesses which accept AMEX payments.

The ACCC (Australian Competition and Consumer Commission), who will be charged with enforcing the ban, has warned businesses about setting single ‘average’ payments for all transactions.

“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.

For example, if a business’s true cost for offering Visa Debit is 1%, 1.5% for Visa Credit and 2% for American Express, they would only be able to set a single surcharge payment of 1%.

The ACCC has also been given new powers to enforce the ban - from issuing businesses with ‘surcharge information notices’ requesting evidence of their payment costs, to court action and potential fines in the thousands of dollars.

As of tomorrow excessive surcharges may be a thing of the past, but it’s still important to make sure you get the best credit card deal for your wallet. Whether you’re looking for a balance transfer to ditch debt or a more rewarding earner, the Mozo credit card comparison tool can help you find the right piece of plastic.