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 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. 

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.


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.

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

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