Summary
- Australian law prohibits businesses from charging customers excessive payment surcharges on MasterCard, EFTPOS, Visa, and American Express transactions, limiting surcharges to the business’s actual cost of acceptance for processing each payment type.
- Businesses may apply a flat rate or fixed fee surcharge across all payment types, but must ensure it does not exceed the cost of acceptance for any individual transaction, and where different payment types carry different costs, the surcharge must be set at the lowest rate, not the average.
- Businesses should review their surcharge levels at least annually using bank statements that outline the cost of acceptance for each payment type, and must provide clear signage to customers whenever surcharge levels are adjusted.
- This article is a guide to the ban on excessive payment surcharges for business owners operating in Australia, produced by LegalVision, a commercial law firm.
- LegalVision specialises in advising clients on regulatory compliance and consumer law obligations.
Tips for Businesses
Review your surcharge levels annually using your bank’s cost of acceptance statements. Where different payment types carry different costs, set your surcharge at the lowest rate. If you have recently changed banks or commenced trading, estimate your cost of acceptance in good faith using available monthly statements.
On this page
- 1. What is the Purpose of the Ban?
- 2. Does the Ban Apply to All Businesses?
- 3. Does the Ban Still Affect Businesses That Do Not Pass on Fees to Customers?
- 4. Can Businesses Apply the Lowest Surcharge?
- 5. Can Businesses Apply a Flat Rate Surcharge?
- 6. Can My Business Apply a Fixed Surcharge Fee?
- 7. Can My Business Still Charge a Handling or Processing Fee?
- 8. How Often Should Businesses Review Surcharge Levels?
- 9. What If a Business Has Changed Banks or Has Just Begun Operation as a New Business?
- 10. How Can LegalVision Help My Business?
- Key Takeaways
- Frequently Asked Questions
Australian law prohibits businesses from charging customers more than the actual cost of processing a card payment, known as the ‘cost of acceptance’. This ban on excessive surcharges applies to all businesses accepting MasterCard, EFTPOS, Visa, and American Express. This article answers ten FAQs about the ban on excessive surcharges and how it applies to businesses in practice.
This fact sheet outlines businesses’ obligations under the Australian Consumer Law (ACL), highlighting key strategies to ensure compliance and prevent misleading conduct.
1. What is the Purpose of the Ban?
The ban prohibits businesses operating in Australia or businesses utilising Australian banks from charging customers excessive fees when using MasterCard, EFTPOS, Visa and American Express. Businesses will only be allowed to pass on to customers what it costs the business to process payments — known as the ‘cost of acceptance’.
2. Does the Ban Apply to All Businesses?
From 1 September 2017, the ban applied to all businesses that charge customers for using MasterCard, EFTPOS, Visa and American Express. The ban has applied to large businesses since 1 September 2016 and extended to all businesses from 1 September 2017, including small businesses.
Following the Australian Competition and Consumer Commission’s website, the ban on excessive payment surcharges applies to:
- EFTPOS debit and prepaid cards;
- MasterCard credit, debit and prepaid cards; and
- Visa credit, debit and prepaid cards.
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3. Does the Ban Still Affect Businesses That Do Not Pass on Fees to Customers?
The ban applies to businesses that choose to pass on a surcharge fee to their customers for accepting the payment methods listed above. Passing on these fees is not compulsory; businesses have a few options here. For example, businesses can:
- absorb the fees in the price of their goods or services; or
- cover the fees themselves and not pass them on to their customers in a surcharge or the price of their goods or services.
4. Can Businesses Apply the Lowest Surcharge?
Businesses can set the same surcharge for all payment types. However, the surcharge must be set at the lowest cost method, not the average. For example, if the Visa debit surcharge is 1% and the Visa credit surcharge is 1.5%. You must charge 1% for Visa cards, not the average.
5. Can Businesses Apply a Flat Rate Surcharge?
Businesses may impose one flat surcharge rate (as a percentage) for all payments to make it easier to manage their payment processes. However, businesses doing so must ensure that the percentage applied does not exceed the cost of acceptance for any particular transaction.
6. Can My Business Apply a Fixed Surcharge Fee?
A business can also apply a fixed fee (in dollars) for all transactions. But, once again, you must ensure that the fixed fee is reasonable for each card transaction.
7. Can My Business Still Charge a Handling or Processing Fee?
The new laws do not prevent a business from being able to pass on a handling fee or other fees that are unrelated to the payment method used by the customer.
8. How Often Should Businesses Review Surcharge Levels?
You should review your surcharge levels annually. While the costs may fluctuate monthly, the Reserve Bank of Australia (‘RBA’) Standard will allow you to review your costs once a year using an annual statement from your bank and other materials.
Banks are now required to send monthly statements that clearly outline the cost of acceptance for each payment type, expressed as a percentage. You can reset your surcharge levels more frequently using these statements. If you decide to change your surcharge levels, ensure you provide full transparency to your customers with adequate signage.
You will not receive an annual or monthly statement for any additional fees you may also pay as a surcharge. For these fees, you will need to calculate the permitted surcharge yourself.
9. What If a Business Has Changed Banks or Has Just Begun Operation as a New Business?
If you have changed banks within the last 12 months or been trading for less than 12 months, you will not have an annual statement from your bank for this year. However, the RBA Standard allows you to estimate your permitted cost of acceptance in good faith. Monthly statements can help you to reach a reasonable figure.
10. How Can LegalVision Help My Business?
LegalVision offers a service to ensure your surcharge levels are in order and comply with the current laws – the Surcharge Checker. Under this service, a LegalVision lawyer will:
- review your current surcharge practices;
- review your bank materials to determine your surcharge options;
- offer you a consultation to discuss your options under the new laws; and
- provide you with a certificate confirming your legal surcharge options.
Key Takeaways
The ban on excessive surcharges covers all businesses using MasterCard, EFTPOS, Visa and American Express as payment methods. If you plan to use these cards, follow the above steps in setting up your surcharge method. One of the easiest ways to ensure you comply with the new legislation is to not charge above the maximum surcharge rate and to pass on to customers only what it costs your business to process payments.
If you need help understanding more about surcharge regulations, LegalVision provides ongoing legal support for businesses through our fixed-fee legal membership. Our experienced regulatory compliance lawyers help businesses manage contracts, employment law, disputes, intellectual property, and more, with unlimited access to specialist lawyers for a fixed monthly fee. To learn more about LegalVision’s legal membership, call 1300 544 755 or visit our membership page.
Frequently Asked Questions
The cost of acceptance is what it costs your business to process a payment using a specific card type. Under the ban on excessive surcharges, you can only pass on this exact cost to customers – you cannot charge more than what it costs your business to accept that payment method.
No. Charging a surcharge is optional. Businesses can choose to absorb the processing fees into the price of their goods or services, cover the fees themselves, or pass them on to customers as a surcharge, provided it does not exceed the cost of acceptance.
You can apply a flat rate surcharge, but it must not exceed the cost of acceptance for any individual transaction. You cannot average the costs across card types – the flat rate must reflect the lowest cost payment method to ensure compliance.
If you have been trading for less than 12 months or recently changed banks, you can estimate your permitted cost of acceptance in good faith using the RBA Standard. Monthly bank statements can help you reach a reasonable and compliant figure.
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