In an era where the tap of a card has become the norm for transactions, businesses and consumers alike in Australia are feeling the pinch as card payment surcharge fees hit a staggering $1.3 billion high. This record figure has emerged amidst a cost of living crisis that is already stretching wallets thin, leaving many to question the fairness of the current system.
The convenience of cashless payments is undeniable, but it comes at a cost that is becoming increasingly difficult to ignore. As fees continue to rise, small businesses, in particular, are struggling to keep up with the increasing cost of accepting card payments.
Taking notice of this concern, the government is proposing to ban card surcharges for debit purchases from the start of next year. Meanwhile, the Reserve Bank of Australia (RBA) is conducting a comprehensive review of card payments, signalling that change may be on the horizon.
Bradford Kelly, co-founder of the Independent Payments Forum, has been vocal about the need for a shakeup, saying, ‘It’s a $1.3 billion problem. And I think it’s important to understand that small businesses pay astronomical fees compared with big business.’
While mega-corporations like Bunnings, Coles, and Woolworths benefit from favourable arrangements with payment service providers (PSPs), small businesses are not so lucky. The RBA’s report from last year revealed that businesses with a turnover of less than $100,000 per year pay nearly 1.5 per cent of the value of card transactions in merchant fees, while those raking in over $10 million annually pay just over 0.5 per cent per transaction.
The disparity is stark, with around half of small merchants paying between 1.5 to more than 2.5 per cent per card transaction.
For many, like Belinda Ellis who runs a coffee shop and bookstore in Brisbane, these fees can range from $300 to $900 per month, which she equates to a junior wage or even her proper salary.
The impact is so severe that some businesses, like Belinda’s, have encouraged customers to pay in cash, resulting in a noticeable increase in cash transactions. While handling cash has its own set of indirect costs, many business owners prefer it to the alternative of exorbitant card payment fees.
The RBA’s proposed ban on card surcharges for consumers is a welcome move, but Kelly insists that merchant fees need to be levelled. The fees not only vary wildly based on a business’s revenue but also on the type of card payment technology used.
With fintech payment devices like Square and Tyro, the surcharge for the consumer significantly exceeds the typical 0.5 to 1 per cent for debit transactions.
These fintech companies argue that their models, which include invoicing and data analytics, have ‘helped reduce average merchant fees by 15 per cent’ over the last decade. However, Kelly points out that consumers and small businesses often end up paying for services they didn’t request through higher surcharges.
‘Well, I don’t know, as a consumer, why should I be paying for all that stuff in a surcharge I didn’t ask for? And the small business doesn’t ask for all these things either, they don’t necessarily need them all, but they’re being charged for it,’ he explains.
‘That’s the twist of the knife, as it means that the merchant is being gouged, and they’ve got no choice but to surcharge.’
The debate over who should bear the brunt of these fees is ongoing. A Yahoo Finance poll found that 50 per cent of respondents believe banks should shoulder all associated card payment fees. Yet, industry players maintain that these fees are simply part of doing business and that the immediate payment benefit to merchants justifies the cost.
As the RBA continues its review, the conversation around card payment fees is heating up. For consumers, the hidden costs of these fees are becoming more apparent, and the call for transparency and fairness grows louder.
Have you noticed an increase in surcharges when you pay by card? Do you think businesses should absorb these costs, or is it fair to pass them on to consumers? Share your thoughts and experiences with the YourLifeChoices community in the comments below.
Also read: From cashless to cardless? Your phone could be the only wallet you need!
Any card transactions online or ATM
As id the banks and like companies aren’t making enough profit. It is all about the bottom line for these companies and then they avoid paying the correct tax on their earnings. People should be able to claim this excess tax back at tax time.
Agree. The Federal govt/ Treasury is forcing us to use a card. Every time we use our card we are devaluing the money we spend. I went out to a cafe to have a morning tea with my daughter and her two young children for coffee and cake. costing just over $40.00. Surcharge was 81 cents. If I paid cash, it would have cost me 81 cents less to keep in my bank account. The banks need to stop this as they do not really serve the community — they just rip us off. Perhaps we could also start charging the Federal Govt for it as well as they are the ones trying to stop the use of cash.
Despicable greedy banks! 😡
To continue. All electronic transactions should be free. Just think what the banks are saying, don’t need a teller, therefore no wages, holiday pay, overtime, super, sick days etc. No Bank Branch, the sky’s the limit on savings there, no cleaners, no business stationary or facilities, no conferences to pay for, no cash deliveries. Savings of billions of dollars. And just to add insult to injury, if you get scammed and you lose the money you lent the bank ( savings are a loan to the bank) they take no responsibility for its loss. We are fools!
Why is the Surcharge a Percentage of the Total Bill, why is not a simple fixed charge just like ATM’s, or even better, why do we have to pay a surcharge at all ??
We are being forced into using Electronic Transfers for just about everything, and the use of Cash is being withdrawn, so why do we have to pay extra for the same transaction ???
Any fees should be added into prices as a cost of doing business.
The current system now is towards new technologies to save money and create unemployment. The Banks in particular are so guilty in doing tricks to deceive the masses. The jump on new technologies and force the public to use them and yet the technologies that they want us to use are not 100% secured and are therefore subject to scams and frauds. Why does the government allow this? simple, because the Politicians are in their pockets. No politician is brave enough to upset the banks because they’re afraid to lose their Party contributions to win the next election and therefore won’t make it mandatory for banks to pay back people who lose their money through scams of frauds. This is how people in power are using their power right under our noses and get away with it at our expense.
Shame on the banks, shame on the Govt for pushing us to a cashless society,keep pushing back membership, we’re all voters!
It’s bad enough, companies charge you a surcharge when you use you Mastercard but now lots of them are changing a surcharge for debit cards and a restaurant we went to added a surcharge when we used cash too. In addition; there too many establishments which do NOT display or tell you about their surcharge cost and you don’t notice the charge until you check receipt. Not displaying the surcharge cost is illegal but so many businesses, especially restaurants don’t care about legality off.