Have you ever paid for a coffee or lunch with your card and noticed an extra charge on the bill? These small surcharges might seem insignificant, but over time, they add up. Australians collectively lose nearly $1 billion annually to these fees. Unlike the UK and the European Union, where surcharges are banned, they remain legal in Australia. Recently, it seems more retailers, especially smaller ones, are adding these surcharges at checkout. Here are some ways to reduce or avoid these fees.

Swiping or Inserting Your Card Could Lower Surcharges

Many debit cards are “dual network” cards, allowing transactions through both the Mastercard/Visa network and the EFTPOS system. Using the EFTPOS system can often lower or eliminate surcharges. To do this, swipe or insert your card and choose the “savings” option. Although businesses can still apply a surcharge for EFTPOS payments, it is generally lower than for other card types. Some bank cards can also use EFTPOS when tapped, avoiding the more expensive Visa/Mastercard networks. If you prefer using digital wallets on your phone, check if you can adjust settings to use EFTPOS for tap payments. However, this feature isn’t available on all cards, so confirm with your card provider first.

The Reserve Bank of Australia (RBA) is also working on implementing “least-cost routing” (LCR), which processes payments using the lowest-cost network by default. While many providers have started using LCR, it isn’t yet universal.

Consider Paying in Cash

One straightforward way to avoid card surcharges is to use cash. While businesses can charge a fee for card payments, they cannot do so for cash payments. This can be particularly beneficial for larger transactions. For example, avoiding a 1% surcharge on a $1,000 purchase saves you $10. However, keep in mind that some businesses do not accept cash. If a business only accepts cards, the Australian Competition and Consumer Commission (ACCC) mandates that any surcharge must be included in the advertised price. For bills and scheduled payments, bank transfers or BPAY may help you dodge extra fees.

Disclosure of Surcharges by Businesses

According to the ACCC, businesses must inform consumers about any surcharges “at the earliest possible point before consumers make their order or purchase.” Under Australian Consumer Law, businesses must display clear and accurate prices and cannot mislead consumers. This includes being upfront about any additional costs and whether they are optional or dependent on specific information provided during the transaction. It is common for businesses to post signs at the point of payment or on the payment terminal itself. Others might include surcharge information on price lists or menus.

Typical Surcharge Rates for Card Payments

Surcharges must not exceed the cost incurred by the business for using a particular payment method. The ACCC provides estimated average costs for different card payment types:

• EFTPOS: Less than 0.5%

• Visa and Mastercard debit: Between 0.5% and 1%

• Visa and Mastercard credit: Between 1% and 1.5%

Some businesses may opt for a fixed surcharge (e.g., 10 cents per transaction) or apply a surcharge to payments below a certain amount. Both methods are permissible, but flat fees must not exceed the cost to the business for processing that payment type.

What to Do About Excessive Surcharges

If you encounter a surcharge that seems excessive, the ACCC advises contacting the business first to resolve the issue. A surcharge is deemed excessive if it exceeds the cost to the business for processing the payment. If you cannot resolve the issue with the business, you can file a complaint with your state’s fair-trading body. Additionally, you can report excessive surcharges to the ACCC, which has the authority to issue penalties. However, the ACCC does not mediate individual disputes between customers and businesses.

Hidden Fees with Tap-and-Go Payments

Many Australians are unaware that the convenience of tap-and-go payments can come with hidden fees. These surcharges can add up to $1 billion annually. While tapping your card is convenient, it might not be the best for your finances. When you tap, banks usually process the payment through Visa or MasterCard, which incurs a fee, instead of the cheaper EFTPOS system. While some businesses absorb this cost, others pass it on to customers as a surcharge.

Payments through EFTPOS are generally about 0.3% of the transaction value, whereas Debit Mastercard and Visa Debit may cost merchants around 0.5%. Mastercard and Visa credit could cost more than 0.75%, and American Express payments can be even higher, ranging from 1% to 1.5%.

How to Avoid Hidden Fees

To avoid these extra charges, you can change the default payment setting on your phone if your card is linked to it. On an iPhone, go to ‘Settings,’ then ‘Wallet & Apple Pay,’ select your debit card, and choose ‘EFTPOS SAV’ under ‘Payment Option.’ This option is not available for all cards, and Android users should check with their banks for similar solutions. Another way to avoid surcharges is to insert or swipe your card and choose ‘cheque’ or ‘savings’ to use the EFTPOS system, which may result in lower fees at larger retailers.

How to Save Yourself from the Tap-and-Go Rip-Off

Tap-and-go payments have become incredibly popular due to their convenience. More than half of all in-person transactions are now done this way. However, this convenience comes at a cost. The use of cash for transactions has decreased from 26% to just 13% over the past three years. With surcharges becoming more common, some consumers are reverting to using cash to avoid these fees. The challenge now is to make tap-and-go as affordable as it is convenient.

Wallets, Banks, and Card Companies Keeping Costs High

The fees charged by electronic wallet providers such as Apple and Google are significant, costing banks an estimated $100 million annually. Treasurer Jim Chalmers has agreed to give the RBA extra powers to intervene in this area, which could lead to cheaper wallet fees in the future. However, consumers currently have limited control over directing their payments to the cheapest option, usually EFTPOS. Some EFTPOS solutions can be added to tap-and-go payments, but they are not yet widespread.

Cheaper Options Often Not Selected

There have been claims that banks are making windfall gains by processing tap-and-go transactions through the highest fee methods, sometimes even as international credit card transactions. The fees for tap-and-go range from 1.1% to 2% of the purchase price, while EFTPOS fees are much lower, at just 0.5%. This discrepancy can lead to higher prices for all customers or additional surcharges.

Consumer Knowledge and Small Business Impact

Greater consumer awareness about the EFTPOS system and demanding its use could lead to savings. Small businesses, which are charged more for tap-and-go facilities than larger retailers, could benefit significantly from this shift. Small business lobby groups are advocating for payment terminals to automatically select the cheapest routing option, even if it requires banks to update their terminals.

PayTo and Future Developments

Retailers are also exploring new payment systems to reduce costs. Woolworths, for example, plans to use Australia’s real-time payments system as a cheaper alternative to card networks. This system, known as PayTo, will allow customers to link their bank accounts directly to the Woolworths app, reducing payment costs and providing instant cash flow benefits for the retailer. As PayTo gains traction, it could help bring down the overall costs of tap-and-go transactions.

By being aware of these tips, you can make more informed decisions and potentially save money on everyday transactions.

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