Card Surcharge Changes: Activist Campaign Renewed

An activist group has renewed its campaign against Australia’s card surcharge rules, urging the government to ban surcharges on debit and credit card transactions. The renewed push comes as the government considers reforms to the payment system, and the activists argue that surcharges are unfair to consumers and disproportionately affect small businesses. This article explains the current rules, the arguments for and against surcharging, and what changes might be on the horizon.

Background: Australia’s Card Surcharge Rules

In Australia, merchants are allowed to pass on the cost of accepting card payments to customers, but only up to the actual cost of processing the transaction. The rules are set by the Reserve Bank of Australia (RBA) and enforced by the Australian Competition and Consumer Commission (ACCC). The key points:

• Surcharges must not exceed the merchant’s cost of accepting that particular payment method.
• Merchants must display surcharges clearly before the customer completes the purchase.
• Debit cards, credit cards, and other payment methods can have different surcharge rates, reflecting the different processing costs.

The RBA has been reviewing the payments system, and in 2024 it proposed a ban on surcharges for debit card transactions, while keeping them for credit cards. The activist campaign is pushing for a complete ban on all surcharges, arguing that the current system is confusing and penalises consumers.

Why Activists Want a Ban

The renewed campaign, led by consumer advocacy groups, argues that surcharges are an unfair “tax” on shoppers. They claim that:

• Many merchants charge more than their actual processing cost, despite the rules.
• Surcharges are often hidden until the final step of checkout, making price comparison difficult.
• Small businesses are hit twice: they pay high processing fees and also risk losing customers who see a surcharge as a deterrent.

The activists also point out that in many countries, such as the European Union and the United Kingdom, surcharging is banned outright for consumer cards. They argue that Australia should follow suit to protect consumers and simplify the payment experience.

Arguments Against a Ban

Not everyone supports a ban. Some business groups and payment industry bodies argue that surcharging encourages price transparency and keeps costs down for all customers. Their key points:

• If surcharges are banned, merchants may simply raise the base price of goods to cover card processing costs, meaning cash and EFTPOS customers effectively subsidise card users.
• Surcharges incentivise customers to use cheaper payment methods, which reduces overall processing costs for the economy.
• A ban would reduce competition among payment providers, as merchants would have less reason to negotiate lower processing fees.

The RBA’s own review found that while surcharging is widespread, most merchants do comply with the cost limit. However, the RBA acknowledged that some consumers are still overcharged, and that the system could be simpler.

How Surcharges Work in Practice

When you pay by card, the merchant pays a fee to their bank or payment processor. This fee is typically a percentage of the transaction plus a fixed cent amount. For example, a merchant might pay 1.5% + 10 cents for a credit card transaction, but only 0.5% for a debit card transaction. The merchant can then pass this cost on to you as a surcharge, but they cannot add a margin on top.

In practice, many merchants choose to absorb the cost and not charge a surcharge, especially for smaller amounts. Others apply a flat surcharge, like 30 cents, which may be more than the actual cost for very small transactions – that is technically against the rules, but it is rarely enforced.

What Changes Are Being Considered?

The RBA’s 2024 consultation paper proposed several options:

• Ban surcharges on debit card transactions only.
• Ban surcharges on all transactions under a certain amount (e.g., $10).
• Require merchants to display surcharges more prominently, such as in the advertised price.

The government has not yet made a final decision. The activist campaign aims to influence that decision by gathering public support and presenting a petition to parliament. They argue that a full ban is the only way to ensure fairness, while the RBA is more cautious, noting that a ban could have unintended consequences.

How to Avoid Paying Surcharges

While the rules are being debated, you can take steps to avoid surcharges:

• Pay with cash or EFTPOS (debit card) where possible – these often have no surcharge or a lower one.
• Compare prices: if one shop charges a surcharge and another doesn’t, factor that into your decision.
• Ask the merchant if they offer a discount for cash – some do.
• Use a payment app that may not incur a surcharge, though check the terms.

If you believe you have been charged an excessive surcharge, you can report it to the ACCC. The ACCC can issue fines and take legal action, but it does not refund individual consumers.

Frequently Asked Questions

Is it legal for a business to charge a surcharge on EFTPOS?

Yes, but the surcharge must not exceed the merchant’s cost of accepting that payment. For EFTPOS, the cost is usually very low (often under 0.5%), so a surcharge of more than that is illegal. Many merchants do not charge a surcharge on EFTPOS at all.

Can a business charge a flat fee surcharge, like 50 cents?

A flat fee is allowed only if it does not exceed the merchant’s actual cost for that transaction. For a small transaction, a 50-cent surcharge might be more than the cost, making it illegal. However, the ACCC has limited resources to police this, so it often goes unnoticed.

What is the difference between a surcharge and a convenience fee?

In Australia, they are essentially the same thing. The term “convenience fee” is sometimes used for online payments, but the same rules apply: it must reflect the cost of processing the payment, not be a profit centre.

Will a ban on surcharges increase prices?

Possibly. If merchants cannot pass on the cost, they may raise the base price of goods to cover their processing fees. This would mean cash payers effectively subsidise card users. The RBA has noted this risk in its review.

How do I report a business that charges an excessive surcharge?

You can contact the ACCC via their website or phone. Provide details of the transaction, the amount of the surcharge, and the business’s name. The ACCC uses this information to identify patterns and may take action against repeat offenders.

Are surcharges common in Australia?

Yes. Surveys by the RBA have found that around 40% of small businesses charge a surcharge on card payments, and the rate is higher for credit cards than debit cards. The average surcharge is around 1.5% for credit cards and 0.5% for debit cards.

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