Breadcrumb

Credit card surcharges: what does the law say?

Written by

The GoCardless content team comprises a group of subject-matter experts in multiple fields from across GoCardless. The authors and reviewers work in the sales, marketing, legal, and finance departments. All have in-depth knowledge and experience in various aspects of payment scheme technology and the operating rules applicable to each. The team holds expertise in the well-established payment schemes such as UK Direct Debit, the European SEPA scheme, and the US ACH scheme, as well as in schemes operating in Scandinavia, Australia, and New Zealand. See full bio

Last editedFeb 20202 min read

In September 2017, it became illegal for Australian businesses to charge excessive credit card fees for using EFTPOS and credit cards. If you’re a merchant that imposes credit card charges on your customers, it’s very important to be up to date with the latest credit card surcharge laws in Australia. Find out everything you need to know, right here.

What is a credit card surcharge?

A credit card surcharge is an extra fee that customers pay on top of the listed price of goods or services when they choose to pay with a credit card or EFTPOS. Credit card surcharges are used by businesses to cover the cost of processing the payment.

What level of credit card surcharge is allowed in Australia?

According to the Competition and Consumer Amendment (Payment Surcharges) Act 2016, credit card surcharge laws in Australia prohibit “excessive” credit card fees. The law states that credit card surcharges should cover the cost incurred by the merchant when processing the transaction, but no more. While there isn’t a set amount that the Reserve Bank of Australia (RBA) has deemed excessive, they have defined the costs that can be covered in the allowable surcharge. These costs include:

Merchant service fees
Fees for renting and maintaining credit card terminals
Other fees incurred in processing credit card transactions, including cross-border transaction fees, switching fees, and fraud-related chargeback fees

In addition, there are a couple of costs paid to other providers that that may be included if they’re directly related to accepting that particular type of card. These costs include:

Gateway fees to a payment service provider
Fraud protection services paid to an external provider
Cost of insurance against forward delivery risk
Any other fees related to renting or maintaining credit card terminals paid to a provider other than the merchant’s payment facilitator or acquirer

What payment types are covered by the ban on excessive fees?

It’s important to note that the regulations on excessive credit card fees only apply to certain payment types. Payment types that are covered by the law include:

EFTPOS (prepaid and debit)
Mastercard (prepaid, debit, and credit)
Visa (prepaid, debit, and credit)
American Express “companion cards” (i.e. American Express cards that have been issued through an Australian financial service provider)

However, the ban does not extend to PayPal, UnionPay, BPAY, Diners Club, or American Express cards that have been directly issued by American Express.

What are the penalties for excessive credit card surcharge in Australia?

Businesses that continue to charge excessive credit card fees may be punished by the Australian Competition and Consumer Commission (ACCC). The penalties for excessive credit card surcharges in Australia are as follows:

600 penalty units ($126,000) for listed corporations
60 penalty units ($12,600) for a body corporate
12 penalty units ($2,520) for a person other than a body corporate

If court action is required to deal with excessive credit card charges, the following pecuniary penalties could be levied:

6,471 penalty units ($1,358,910) for a body corporate
1,295 penalty units ($271,950) for a person other than a body corporate.

As you can see, these penalties can be relatively severe, particularly for smaller businesses like market stall vendors or tradies whose cash flow could be decimated by a larger fine.

Can I report a business for an excessive EFTPOS surcharge?

Yes. The ACCC encourages people to complain about businesses that may be charging excessive credit card fees. You can do so online or via phone.

What’s the alternative?

If you’re a merchant, dealing with the new credit card surcharge laws in Australia can be a challenge, but there are plenty of solutions. While you probably shouldn’t remove cards as a payment option, it may be a good idea to provide alternative payment methods for customers to pay with. Bank-to-bank payments like BECS Direct Debit can be a great choice.

We can help

GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.