Australian credit and debit card surcharges explained

Why do Australian businesses have credit card surcharges?

When you buy something from a business via a credit or debit card there's a small processing cost for the business.

This is true whether you tap and pay with a Visa or Mastercard credit card or insert and use EFTPOS.

Businesses can pass this cost onto customers via a surcharge.

But I don't pay a surcharge everywhere I shop?

Businesses have always paid banks a fee for accepting credit cards, but in the past, credit card and debit card transactions were only a small part of their income.

Now most transactions are by card, and businesses are looking for ways to recoup this cost.

Things that can influence the cost include the size of the business, payment method and the technology that's involved. Many large retailers, like the big supermarkets, don't charge card fees at all.

Finder survey: How often are Australians charged extra for paying by card?

How much is a credit card surcharge?

Businesses can set their own surcharge amount as long as it is based on the actual cost of accepting a particular type of payment.

But excessive surcharges are banned.

The Australian Competition and Consumer Commission (ACCC) offers the following surcharge guidelines:

• Visa and Mastercard credit cards: 1% to 1.5%
• EFTPOS: Usually less than 0.5%
• Visa and Mastercard debit cards: 0.5% to 1%

But these are guidelines only. Costs can vary between businesses.

What about Amex surcharges?

American Express credit cards are exempt from the ban on excessive surcharges (as are BPAY and PayPal payments). According to data from the Reserve Bank of Australia, Amex card surcharges average around 1.33% per transaction.

The ATO has a an Amex card surcharge of 1.45%.

What are the rules for credit card surcharges?

The RBA sets out the surcharge rules that merchants have to follow. The ACCC is in charge of enforcing these rules.

1. Merchants are allowed to charge a fee to recover the cost of processing/accepting card payments.
2. This surcharge can't exceed the cost of processing the card payment.
3. Payment providers must give merchants and businesses an annual statement that sets out their average card payment costs by type.
4. Merchants can also pass on other payment costs, such as payment terminal fees.

How businesses can calculate surcharges

The cost of accepting a Visa debit card payment from one customer will be different to the cost of accepting a Mastercard credit card payment from another customer.

By law, merchants can't just charge the higher fee to all transactions. They have to either charge the lowest surcharge to all payments, or a separate surcharge for each payment type.

• Lowest surcharge. If debit card transactions cost a business 0.50% per transaction and credit card transactions cost 1.0%, a merchant can charge 0.50% for all transactions. It can't charge 1.0% on all transactions as this would be excessive.
• Surcharge by payment type. The same business could charge 0.50% for debt card transactions and 1.0% for credit card transactions.
• Flat fee. A business could charge a flat fee to cover all these costs. But that flat fee can't exceed their costs for each transaction type.

It's common to see businesses charge a fixed surcharge of, for example, 50 cents for card transactions under $5. This is not actually allowed, because that's a 10% surcharge.

The surcharge a business charges can't be worth more than what it costs the business to accept a particular payment method.

"The example above is real. I get a coffee most mornings and pay with a credit card. The cafe's menu says the price is $5. But each time I pay $5.50. That's a 10% surcharge! That's against the RBA's rules. But clearly these rules aren't enforced well and are probably annoying for small businesses to follow either. But that's no excuse. This is costing me $2.50 a week!"

Richard Whitten

Money Editor

Payments that attract a surcharge

Businesses can choose to apply a surcharge on any form of payment that incurs a cost for them to process:

• American Express (credit card and prepaid)
• Mastercard (credit card, debit card and prepaid)
• Visa (credit card, debit card and prepaid)
• Eftpos (debit and prepaid)

Some businesses also apply a fee for other payment options, such as BPAY or PayPal. For example, both Qantas and Virgin Australia apply a fee when you pay for a flight with a credit card, debit card or PayPal.

What about other fees?

You may have also noticed some sneaky fees showing up on your receipt when you dine at a cafe or restaurant, especially when using QR code ordering platforms. These platforms often charge a fee of 1.5% to 1.7% for the "convenience" of purchasing through the app.

Again, the business can choose whether to absorb this cost or pass it on to the customer. If they pass it on, you can end up paying a double fee, such as 1.7% processing fee and a 1.5% credit card fee. All of these little fees add up! Which brings us to our next point...

How to avoid card surcharges

• Look for a surcharge notice before you pay. You should see signs on or near the cash register. If you're shopping online, this cost should be added before you go through the payment process.
• Use a debit card. Under the latest surcharge laws, debit card payments attract a lower fee than credit cards.
• Pay with cash. It's the most straightforward way to avoid fees, but you have no digital record of purchase.
• Insert your card. Inserting your card incurs a lower charge than tapping. This is annoying because tapping is much more convenient.
• Shop around. Don't want to pay a premium for your morning cuppa? Find a cafe that doesn't charge credit card fees.
• Link your card to PayPal. When you use your PayPal account to make payments, the fees are often lower than paying with a credit card directly.
• Pay with vouchers. Some airlines and institutions don't charge fees when you use a voucher to make the purchase or booking.

Frequently asked questions

• Are credit card surcharges ever illegal?

  A surcharge is typically legal in Australia, as long as the merchant can prove that it covers the reasonable cost of acceptance and has clear notices about the surcharge before you pay.

• What protection is there against high surcharges?

  In 2016, the Australian government introduced an excessive surcharge ban to make sure customers weren't paying more than what it cost to process the payment: the Competition and Consumer Amendment (Payment Surcharges) Act 2016.

  This ban applies to payments made by EFTPOS, Visa, Mastercard and American Express "companion cards" (Amex cards that used to be issued by some banks). It does not technically apply to American Express cards directly issued by American Express, as well as Diners Club, BPAY, PayPal, UnionPay, cheques or cash. But it does help protect you against high surcharge costs.

  If you think a business is charging too much for card payments or other payment methods, talk to the business or contact the ACCC on 1300 302 502.

• If I use my credit card to make a hotel reservation, but end up paying with cash, would I still have to pay a surcharge?

  If you’re paying using cash, the hotel should not apply a surcharge, but it is worth checking directly with the hotel.

• Do I have to pay interest on surcharges?

  The money you pay for a credit card surcharge falls under purchases, so you could have to pay interest on it if you carry a balance.

To make sure you get accurate and helpful information, this guide has been edited by Richard Whitten as part of our fact-checking process.

Written by

Sarah Megginson

Personal finance expert + media spokesperson

With over 20 years of experience in property, finance and investment journalism, Sarah is a trusted expert whose insights regularly appear across television, radio, and print media, including Sunrise, ABC News, and Yahoo! Finance. She has previously served as managing editor for Your Investment Property and Australian Broker, and her expert advice has been shared over 2,500 times in 2023-2024 alone. Sarah holds a Bachelor’s degree in Communications and a Tier 1 Generic Knowledge certification, which complies with ASIC standards. See full bio

Sarah's expertise

Sarah has written 200 Finder guides across topics including:

• Home loans
• Personal finance
• Budgeting and money-saving tips
• Managing the cost of living