New PayPass and payWave surcharge rules
In February 2016, Parliament passed the Competition and Consumer Amendment (Payment Surcharges) Act 2015 to ban excessive surcharges on credit and debit transactions.
The new legislation essentially bans a flat rate surcharge, like the ones found on music or sporting ticketing services, and replacing them with a percentage fee with a set cap.
The Reserve Bank of Australia (RBA) are yet to set the cap on the surcharge percentage that merchants are allowed to charge consumers using credit; however, they have stipulated a guide as to what a reasonable ‘cost of acceptance’ may be.
The RBA has said as a guide, that Visa and MasterCard debit card transactions have a relatively low cost of acceptance of around 0.5% of the transaction.
For credit card PayPass and payWave transactions, the acceptance rate is a little higher, typically ranging from 1 – 1.5% for Visa and Master card, while the figure is 2 – 3% for American Express cards.
What does this mean for contactless payments?
It means that, depending on the vendor, you might previously have been paying more than the credit processing fee in each of your transactions.
While it is normal to have a credit processing fee, or merchant fee, some businesses will choose to pass on much higher fees while keeping the profits.
Up until now, the cost of acceptance was always determined by the merchant, assuming that they could charge the cost it takes to accommodate credit transactions.
So while simply ‘tapping and going’ has changed our lives in the manner of efficiency, it may have also been costing us dearly.
Before the new laws, research commissioned by MasterCard in 2015 showed Australians were paying around $1.6 billion each year in surcharges. While some major merchants, like Coles and Woolworths, simply absorbed the cost of processing into their business, others like Aldi and Westfield Car Parks charged anywhere from 0.5% – 2.5% on credit transactions. And it was also found that most taxis added on an enormous 10% surcharge onto every cab charge credit transaction.
What about debit cards with contactless payment?
Unfortunately, debit cards are being charged the same surcharge as any credit card when customers choose to make PayPass or payWave contactless payments.
When using PayPass or payWave, the debit card accesses the “credit” processing service and automatically incurs the merchant fee on the transaction.
The only way to avoid this happening currently is to only shop with businesses that choose to absorb the cost of credit, or to use EFTPOS. This means taking the slightly slower, slightly more inconvenient route of inserting your card and selecting the “savings” or “cheque” option at the check-out.
What can I do if I’m excessively surcharged?
The Australian Competition and Consumer Commission (ACCC) have the power to enforce the new changes to surcharges and will punish any merchant they catch that charges its customers excessively.
A penalty of up to $108,000 and an infringement notice will be given to businesses that breach the new laws.
Consumers are encouraged to “Dob in the Wrongdoer” to the ACCC for breaches of the new surcharging laws by large businesses: http://www.accc.gov.au/contact-us/contact-the-accc Note that for small businesses, the laws only into effect on 1 September 2017, so they cannot be reported before then.
If you’re currently comparing credit cards, the comparison table below displays some of the low interest credit cards currently available on Canstar’s database for Australians looking to spend around $2,000 per month. Please note that this table features links direct to the provider’s website, and is sorted by Star Rating (highest to lowest), followed by provider name (alphabetical). Use Canstar’s credit card comparison selector to view a wider range of credit cards.