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Whether purchasing something in store, online or over the phone, paying for the price of the product is not always enough. We’ve all felt the sting of credit card surcharges that seem over the top. But this is all about to change. The Australian Competition and Consumer Commission (ACCC) and the Reserve Bank of Australia (RBA) have cracked down on big businesses that pass on excessive surcharges to their customers.

What is a Credit Card Surcharge?

A credit card surcharge is an additional fee that many businesses include when customers make a purchase. Some assume that these surcharges are a way to scam customers to pay more. In reality, surcharges are usually applied to help businesses cover their costs of accepting card payments.

However, some companies impose much higher surcharges than these figures – and the costs start to stack up for consumers. According to research conducted by MasterCard in 2014, the average consumer pays over $130 in surcharges every year. Although the new laws are not designed to eliminate credit card surcharges entirely, they impose a ban on excessive fees.

How Much is Excessive?

The new laws declare a surcharge is excessive if the merchant charges more than the costs they incur for each transaction. The RBA has provided a guide to common costs businesses incur for accepting credit card payments:

  •    Debit card: 0.5%
  •    Credit card: 1-1.5%
  •    American Express cards: 2-3%

The Legal Changes

The new law is known as the Competition and Consumer Amendment (Payment Surcharges) Act 2016 (CAA), which will operate in conjunction with the RBA standards to regulate merchants applying excessive surcharges in the following ways:

  • Any surcharge will be limited to the amount it costs the business to accept and process that type of card for that transaction;
  • Businesses must not attempt to by-pass the new ban by introducing what is in effect a surcharge by calling it something different. For example, the ban will still apply to charges which are called ‘service fees’ or ‘handling fees’ but only to apply to specific payment methods.
  • The ACCC has been awarded new powers to enforce the ban. If the ACCC believes that a business has charged an excessive payment surcharge, it may issue an infringement notice to the business, which can result in the payment of a penalty or court action.

The new framework under the CAA places the responsibility on the merchants to ensure that they are complying with the limits placed on applying surcharges. To assist businesses in complying with the new ban, banks and other payment facilitators, are required to clearly outline the cost of acceptance for each type of card payment.

Who Does the New Law Effect?

The new law has been in force since 1 September 2016. For now, the ban only applies to large businesses, including the big corporates, online retailers and even some event ticketing companies.

A large business is defined as having two of the following:

  •    A gross revenue of $25 million or more;
  •    Gross assets worth $12.5 million or more; or
  •    At least 50 employees.

The ban will be extended to all businesses on 1 September 2017.

It is important to note that the ban has no effect on those that choose not to impose a payment surcharge, such as businesses who incorporate payment system costs into the prices of their products.

The Penalties

The ACCC has been given powers to impose penalties on any businesses, to which the law applies who they believed to have breached the new ban. The possible penalties include:

  •    600 penalty units ($108,000) for breaches by a listed company;
  •    60 penalty units ($10,800) for body corporates; and
  •    12 penalty units ($2,160) for individuals other than body corporates.

The ACCC can also initiate court action against businesses for breaching the new laws. Consumers who feel they have paid excessive credit card surcharges should submit a complaint to the ACCC.

Key Takeaways

It is important to remember that these new rules only apply to excessive surcharges and do not impose a ban on all fees for credit card payments. Similarly, it does not affect other extra costs, such as booking fees or service fees.

  • Large businesses – buckle down and review your pricing practices. Make sure you are aware of the new laws and ensure you are complying with the CAA.
  • Small businesses – prepare yourselves for next year when the same ban will apply to you.


Need some advice on how to cover your costs while complying with the law? Or need some help on how to prepare for the change to come? Get in touch with our specialist consumer lawyers on 1300 544 755.


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