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Relief for consumers as hefty card surcharges banned

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Consumers will no longer be slugged with hefty fees for paying by card, with businesses banned from charging excessive surcharges from September 1.

The ban was first rolled out to large businesses last September in an attempt to curtail the $1.6 billion Australians were paying in card surcharges each year.

It limits how much a business can charge customers for using a debit or prepaid EFTPOS card, a credit, debit or prepaid Mastercard or Visa, or American Express card issued by an Australian bank.

credit card surcharge by sharyn mccowen

"The good news for consumers is that businesses can now only surcharge what it actually costs them to process card payments, including bank fees and terminal costs," says ACCC deputy chair Dr Michael Schaper.

If a business's cost of acceptance for Visa Credit is 1.5%, consumers who pay with a Visa credit card cannot be slugged a surcharge of more than 1.5%.

"Our message to business is that you are not allowed to add on any of your own internal costs when calculating what surcharge you will charge customers. The only costs businesses can include are external costs charged to you by your financial provider."

The ban has now been extended to all business based in Australia or using an Australian bank.

Business owners who want to set a single surcharge must opt for the lowest-cost method, rather than an average.

"Our advice for businesses wanting to set a single surcharge regardless of the type of card their customers use is it must be the lowest of all the payment methods. You can't use an average of all payment methods or you will land yourself in trouble," Dr Schaper says.

According to the RBA, the costs to merchants of accepting payment I about 0.5% for a debit card, 1-1.15% for a credit card, and 2-3% for an American Express card.

The ban does not affect businesses that choose not to apply a surcharge to payments.

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Sharyn McCowen is Money's online producer. She has a degree in journalism from Charles Sturt University, and was a newspaper reporter before moving to magazines and finance.
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