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.  Anexcessive 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: 

  • 0.5% for debit cards,
  • 1-1.5% for credit cards and
  • 2-3% for American Express cards which have been issued by banks.

How is a large business defined?

A large business is defined as meeting two of the following criteria:

  • Gross revenue of $25 million or more
  • Gross assets worth $12.5 million or more
  • 50 or more employees

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.

If the charge is more than 1% then this would be regarded as excessive and the ticket agency would be in breach of the new laws.
Consumers will have access to the ACCC to investigate any charges they feel are excessive and outside the guidelines.

For more detailed information for businesses and consumers about what the new law means refer to the ACCC's website and the RBA's website 

If you would like any further information or a free financial assessment, please contact Dean at MCKFS  to arrange a no obligation appointment.

#everyoneneedsaplan to save on fees and charges.

Author:Dean McKinnon
McKinnon Financial Planning Pty Ltd ABN 74 155 233 784 Australian Financial Services Licence 417488 | McKinnon Financial Services Pty Ltd ABN 82 056 817 648 Australian Credit Licence 392173 | General Advice Warning: Information contained in the pages of this website is of a general nature only and has not taken into account your particular circumstances. You should consider whether any strategies and or investments mentioned in this website are suitable for you and seek personal advice from a licenced investment adviser before making any investment decision.
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