Is Surcharging Legal in Australia?

What Is Surcharging?

Surcharging occurs when a business adds a fee to a transaction to cover the cost of processing card payments. For example, when a customer pays with a credit card, the business may charge an additional percentage or flat fee to offset transaction costs.

This practice is becoming more prevalent as card payments increasingly replace cash. However, businesses must comply with strict regulations to ensure fairness and transparency.

Is Surcharging Legal in Australia?

Yes, surcharging is legal in Australia, but it is heavily regulated by the Australian Competition and Consumer Commission (ACCC) and governed by rules introduced by the Reserve Bank of Australia (RBA).

The key rules for surcharging are:

1. Surcharges Must Reflect the True Cost of Acceptance

   • Businesses can only pass on the actual cost of processing a card payment.
   • This includes merchant service fees, terminal fees, and gateway fees.
   • Charging more than the actual cost is illegal and considered excessive surcharging.
     
     

2. Transparency Is Mandatory

   • Surcharges must be clearly displayed, so customers are aware of any extra costs before completing their payment.
   • If no surcharge-free payment option is available, the surcharge must be included in the total price displayed.
     
     

3. Enforcement by the ACCC

   • The ACCC closely monitors surcharging practices.
   • Consumers can report businesses that charge excessive surcharges. Penalties apply for breaches of the rules.

How Do Surcharge Costs Vary by Card Type?

The cost of processing a payment depends on the type of card used:

• Debit Cards: Generally the most affordable option for businesses to process.
• Eftpos Transactions: Often attract lower fees than credit card payments.
• Credit Cards: Typically cost more to process, with American Express being one of the most expensive options.

How Customers Can Protect Themselves

While surcharging is legal, customers have the right to fair and transparent charges. Here’s how you can ensure you’re not overpaying:

• Look for Clear Signage: Businesses must clearly display surcharge amounts before payment.
• Check the Total Price: If there’s no surcharge-free payment option, the displayed price must include the surcharge.
• Report Excessive Surcharges: If you suspect a business is charging more than the legal cost of acceptance, you can report them to the ACCC.

The Bottom Line for Businesses

For businesses, surcharging can help manage rising operational costs, especially in industries with thin margins. However, to stay compliant and maintain customer trust:

• Regularly review your cost of acceptance to ensure your surcharge reflects actual transaction costs.
• Clearly display surcharge amounts to avoid disputes.
• Work with payment providers who offer competitive rates, as this can reduce your overall processing costs.

Conclusion

Surcharging is indeed legal in Australia, but businesses must tread carefully to comply with regulations and maintain positive customer relationships. By ensuring surcharges are fair, transparent, and reflective of true costs, businesses can strike the right balance between managing expenses and delivering value to their customers.

For customers, understanding your rights around surcharging can help you make informed decisions and avoid paying unnecessary fees. If you ever encounter an excessive surcharge, don’t hesitate to reach out to the ACCC.