CANBERRA, Australia–Australia has officially closed a legal loophole that allowed vendors to charge a credit card surcharge that was actually higher than the cost of taking the payment itself.
That adds up to about a 1.5% interchange fee for Visa or Mastercard, or just 0.5% for a debit card, according to local media.
The change comes after a law banning “excessive” credit card surcharges was put into place in 2016, which followed reports that Australians were paying out $1.6 billion in surcharges per year. Airlines were generally charging the largest fees, often in the range of $10. Coffee shops and cafes were also often adding a 50-cent charge on top — or 14% of a $3.50 coffee.
“All in all, surcharges can add up to as much as 40% per month for one in six shoppers, with 47% of credit card users spending at least $20 per month on surcharges, according to data from American Express,” Australian media reported.
Under the new law, any business that takes Visa, Mastercard, American Express or EFTPOS on cards issued by Australian banks are subject to the law. Business owners that want to surcharge are now obligated to choose the lowest processing fee among the banks and set their surcharge to that.
“You can’t use an average of all payment methods or you will land yourself in trouble,” ACCC deputy chair Michael Schaper told media outlets.
Businesses are also not allowed to add on any of their own internal costs when calculating what surcharge they charge customers, according to Schaper.
Failing to comply can mean fines of $126,000 for listed corporations, $12,600 for unlisted companies, and $2,520 for individually owned businesses.