The food industry has been known as a cash run industry since the beginning of time. However, that’s starting to change. Most consumers carry little cash these days, so they are more likely to pay you with a card. Some restaurants and cafes apply additional fees for public holidays. Some also apply a surcharge for customers paying by credit cards. As of 1 September 2017 all businesses must comply with the new rules applicable to surcharges on card transactions. The penalties for non-compliance are stiff, so take a moment to understand them. Large corporations have been bound by this ruling since 1 Sept last year, but now it applies to all businesses – regardless of size.
The fees you pay as a merchant are varied depending on who your merchant facilities are set up with and which card your customer uses to pay you. As the number of card transactions increase at your POS, so do your merchant fees. It seems only fair to recoup some of that cost by charging the customer directly. Here’s where it gets tricky.
New POS Card Surcharge Regulation Explained
You no longer have the freedom to charge whatever card fees you think are just. The ACCC (Australian Competition & Consumer Commission) have implemented a ruling via the Reserve Bank of Australia that you cannot charge more than the ‘cost of acceptance’. This means that if you incur Visa merchant fees of 1%, you can’t charge your customers more than that. You can’t charge more than it costs you to conduct the transaction.
The total of your merchant fees costs (cost of acceptance) is calculated by adding all the standard card acceptance services you incur – which will be set out in your monthly merchant statement. As of 1 June 2017 all bank statements must outline your ‘costs of acceptance’ for each applicable payment type as a percentage of the value of a transaction.
You can still charge a fee for processing, holiday loading or other charges that are unrelated to payment methods. You will need to ensure you do not mislead customers, and you need to provide adequate disclosure and be clear about the nature of the fee and the circumstances in which it applies. To be clear though, if you impose a fee, however you describe it, that is payable on some payment methods but not others, then it is likely to be a payment surcharge. The ban will apply, and the amount that you surcharge will be limited to your costs for accepting that payment method.
Can I Charge One Flat Fee For All Payment Types?
Yes, but in certain circumstances. Visa, Mastercard, Amex, etc. have different costs of acceptance. This will be set out in your monthly statements – a customised percentage will be provided for each relevant payment type (for example, an individual percentage for MasterCard credit, another for American Express credit, another for Visa Debit, etc.).
If you wish to impose a single surcharge across multiple payment types, you must set the surcharge at the level of the average cost of acceptance of the lowest cost system; that is, no higher than the lowest permitted surcharge.
If your average cost of acceptance for Visa Debit is 1 per cent, for Visa Credit is 1.5 per cent, and for American Express is 2.5 per cent, you will be permitted to charge the same level of surcharge for each payment system, but it will need to be 1 per cent as that is the lowest of all payment systems. You will not be allowed to use the average of those three figures (that is, 1 + 1.5 + 2.5 = 5 divided by 3 = 1.6 per cent).
Covered payment types are:
- Eftpos (debit and prepaid)
- MasterCard (credit, debit and prepaid)
- Visa (credit, debit and prepaid)
- American Express ‘companion cards’ (American Express cards issued through an Australian financial service provider, rather than directly through American Express).
The payment types that are not covered by the ban include: BPAY, PayPal, Diners Club cards, UnionPay, American Express cards issued directly by American Express, cash and cheques.
A simpler option is to factor your merchant fees into your operational costs (which will alter your menu pricing and profit calculations) and don’t charge the customer a card processing fee.
For more detailed information and future reference – download this brief ACCC 2 page PDF fact sheet.
Information contained within our blog and website is general advice only. Always check Fair Work, the ATO and state or industry bodies for the most recent and relevant advice and information. Alternatively, contact us for further assistance.