What are surcharges, and why do I keep hearing about them?
What is a surcharge?
Ever paid for a $14 beer, and then been surprised to see you’ve been charged $14.18? That 18c, that’s the surcharge.
A surcharge is a small fee that is added on top of the price of a customer’s goods or services to cover the payment processing fees charged to the business. This fee is split between the company that issued the customer’s card (Visa, Mastercard etc), the bank that gave the customer the line of credit (CBA, ANZ etc), and the payment processor that moved the money (GreenPay and others).
Why do some companies surcharge?
Surcharging is completely optional, it’s up to the company to decide if they want to surcharge. Some companies choose to surcharge to recoup the fees that they pay to process their customers’ payments in order to reduce the costs that they pay, whereas other companies choose not to surcharge as they absorb the cost in the price of the item.
What are the surcharging requirements?
Our laws in Australia allow for surcharging, with a few conditions:
The surcharge can’t be higher than the ‘Cost of Acceptance’. The Cost of Acceptance is the average fees that the company pays, and includes things like the payment terminal rental as well as any percentage or flat dollar based fees. Typically the Merchant Statement that the company receives each month will tell them their cost of acceptance for each card type.
There has to be a free method to pay available i.e. bank transfer or cash
The surcharge must be displayed prominently and available to customers before they complete the transaction
Okay so why am I suddenly hearing about surcharges?
Surcharging has been in the press lately because of concerns about excessive fees being charged to consumers or other regulations not being followed.
So what’s happening next?
At the end of last year, the Prime Minister announced that the federal government intends to ban surcharging on debit cards and provide $2.1m to the ACCC (our competition and consumer watchdog) to investigate illegal or unfair surcharging practices.
What should my business be doing?
Unfortunately we can’t answer that one for you. At GreenPay, we allow our merchants the option to surcharge, however, the decision of whether to is entirely up to you. You know your customers and your cost base best, and are placed right to make the call. And remember, it’s not irreversible, you can always change your mind later - just contact our friendly support team!