Changes to excessive surcharges on credit & debit cards - what it means to businesses & consumers
Written on the 5 September 2016 by Dean McKinnon
Ever booked a holiday, hotel room, concert tickets? No doubt if you paid by a credit card you may have been slugged with a fee or surcharge above the normal costs incurred by the business in providing the service.
As of 1st September, 2016 a new law has been introduced prohibiting large businesses to charge excessive fees on purchases you make.
Small businesses will also be included in these changes from 1st September, 2017
The Reserve Bank of Australia (RBA is responsible for setting the guidelines and the law will apply to excessive surcharges that were previously charged on Debit cards, Mastercard, Visa and American Express cards issued through banks.
BPAY, PayPal, Diners Club cards, UnionPay and American Express cards issued directly by American Express, cash and cheque will not be covered by this law.
The ACCC will be charged with enforcing the law and investigating possible breaches. Consumers will be able to approach the ACCC if they feel they have been charged excessive surcharges.
What is an excessive surcharge?
Businesses incur processing costs when accepting payment by debit or credit cards. These costs are sometimes included in the price of the product or service or are added on as a surcharge. An excessive surcharge is now determined as any fee which is applied over and above the actual costs incurred by the business providing the service or product. The RBA has set a standard for fees.
RBA Recommended surcharge fees
The RBA has provided a guideline for businesses to determine the percentage they should pass on to the consumer. The RBA recommendations are:
How is a large business defined?
A large business is defined as meeting two of the following criteria:
What does the new law mean to large businesses?
From 1st September, 2016, large businesses will only be able to pass on to consumers the actual cost incurred by the business such as terminal fees and bank fees.
What does the new law mean for consumers?Consumers will save on fees over and above the normal cost to the business. Businesses will no longer be able to charge fees for one type of payment only, however, they must disclose any 'fees' included in the total price so that the consumer is fully aware. These fees cannot be added to the total cost later.
Annie purchases tickets to a concert and chooses to pay via her Mastercard. The ticket agency incurs a cost of 1% by the bank to process the credit card transaction.
The ticket agency does not have to impose a surcharge. However, if it does, the surcharge either as a percentage or flat fee must not be higher than 1% of the transaction value.
#everyoneneedsaplan to save on fees and charges.
Author: Dean McKinnon