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New laws to prevent excessive credit card fees – how does it affect you?

With effect from 1st September, excessive surcharges on credit cards are now illegal to ALL Australian businesses. The ban announced last year, which was already in place for large corporations, is now nationwide. Whilst airlines and ticketing agencies were identified as significant offenders, any company that takes payment via credit card is now subject to the ban.

What does this mean for associations and events

In short, its good news for those who use external suppliers to process receipts such as conference registrations or memberships. Surcharges or mark-ups on credit card processing should come down (or stay the same).  The ban covers the following card payments:

  • 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 ban is effective now and supersedes any existing contracts that are at odds with the law. This is really important as it means any contract with a service provider, for example Event or Association Management, should be checked to ensure you are not being charged excessively. Some (but not all) Event Management companies have made it a habit to charge excessively for card processing as a way of boosting income from client contracts in a less than transparent manner. This will no longer be permitted in law and should be reviewed by you immediately.

According to the ACCC, “the permitted surcharge is an amount not exceeding the costs of acceptance for each designated payment type.”

“The RBA has said that as a guide, payments through the domestic eftpos system (used to process payments from debit cards) are usually quite low. Accepting a Visa or MasterCard debit transaction may cost a business around 0.5 per cent of the transaction value.

Credit cards usually have a higher cost for businesses, and may cost up to 1-1.5 per cent for Visa and MasterCard, and between 2-3 per cent for an American Express card payment. It is important to note that different businesses have different costs of acceptance. Some merchants’ costs might be higher than these indicative figures.”

The ban covers any and all payments made by credit/debit for the above cards whether that be for a membership renewal, event registration or any other product and service. Companies may still charge additional processing fees but they must be quantified and clearly outline why they exist to avoid being deemed an unnecessary surcharge. The ACCC acknowledges that,

“…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.”

If you are unsure whether a processing fee is legitimate then it is best to consult the ACCC for clarification.  If you feel the rate being charged by your third party provider is high then ask them to provide a breakdown of their costs to you.  Any charge in excess of 1.5% for VISA and MasterCard or 2.5% for Amex probably warrants further enquiry.

Companies may opt for a flat fee but this must then be at the lowest rate charged to not be in breach of the law. The ACCC provides the following example:

“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 would be permitted to charge the same level of surcharge for each payment system, but it would need to be 1 per cent as that is the lowest of all payment systems. You would 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).”

For more information, read this useful Q&A Payment Surcharges on the ACCC website (where most of the above information was sourced from. )