Being hit with card surcharges everywhere you go? These are the rules around them

While Australia appears to be moving towards becoming a cashless society, more businesses than ever are charging customers a fee to pay with a credit or debit card.

Increasing numbers of hospitality venues, in particular, are charging customers an additional fee when they pay by card. Source: Getty / Olga Rolenko

If you feel like you're being increasingly slugged with surcharges when you make purchases using your debit or credit card, you're not imagining it.

Recent data shows growing numbers of businesses across Australia are charging customers an additional fee when they pay by card, as they deal with rising costs.

There was a 77.5 per cent increase between 2019 and 2022 in the number of in-person payments by credit and debit card that attracted a surcharge, according to a report released by the Reserve Bank of Australia (RBA) in November.

A separate report from payment provider Tyro found hospitality venues to be the biggest adopters of surcharges, with 43 per cent of pubs and bars and 42 per cent of cafés and restaurants the company services adding a fee to card payments in May last year.

At the same time, the number of Australians using cash is declining.

While 27 per cent of in-person transactions in 2019 were made with cash, by 2022 it had more than halved to just 13 per cent, according to the RBA.

How much are businesses allowed to charge?

When you make a purchase using your card, the business you're buying from incurs costs to process that transaction.

While some choose to absorb the cost, others pass it on to their customers through surcharges.

Under rules set by the RBA and enforced by the Australian Competition and Consumer Commission (ACCC), businesses aren't allowed to add a surcharge that's more than what it costs them to process a specific type of payment.

This ban on excessive payment surcharges applies to payments made via these methods:

• EFTPOS - debit and prepaid
• MasterCard - credit, debit, and prepaid
• Visa - credit, debit, and prepaid

The cost of processing card payments varies between merchants, with smaller businesses tending to face higher bank fees than large ones.

The RBA estimates the average cost of processing different payment methods to be:

• EFTPOS - less than 0.5 per cent
• Visa and Mastercard debit cards - between 0.5 per cent and 1 per cent
• Visa and Mastercard credit cards - between 1 per cent and 1.5 per cent

So if you buy a takeaway coffee for $5, then a 1.5 per cent surcharge on top of that will take the total cost of the transaction to $5.08 (assuming they round up).

For an $11 pint of beer at the pub, the total amount you'll pay with a 1.5 per cent surcharge will be $11.17.

If you order a $45 steak to go with your beer, it will set you back $45.68.

While a 1.5 per cent surcharge may not seem like much when you're buying a coffee, it can soon add up. Source: SBS News

Even businesses that only accept payment by card are allowed to impose a surcharge on their customers, provided the fee is clearly displayed and isn't deemed excessive.

Those that choose to set a flat fee rather than a percentage surcharge need to make sure it is no more than what it costs them to use that payment type.

They are also allowed to set a minimum spend for payment by card.

What forms of payment don't the rules apply to?

The ban on excessive surcharges doesn't apply to:

• BPAY
• PayPal
• Diners Club
• American Express cards issued directly by American Express
• Taxi fares, whatever the payment type

How to avoid card surcharges

The easiest way to avoid any card surcharges is to pay for everything using cash.

If you're not a fan of carrying around cash, you can choose to only buy from businesses that don't charge you to pay by card.

Credit cards, particularly those that offer significant rewards, tend to attract higher surcharges than other payment types, so paying by debit card is your next best option.