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On 1 September 2017 the rules are changing for all merchants that surcharge customers who pay by card.As a merchant, you retain the right to charge an extra fee (surcharge) to customers paying by card. Under the new rules this surcharge is limited to the amount it costs you to accept that type of card for that transaction. Essentially, from September you can’t apply a surcharge that is more than it costs you to process the transaction.

The new rules apply to payment surcharges for six card systems – eftpos, Debit Mastercard, Mastercard Credit, Visa Debit, Visa Credit and the American Express companion card system.


Your updated statement

Your June monthly statement, issued in early July, will include two tables which show how much you are being charged to process payments for the different card types. One table will show you your monthly ‘Cost of Accepting Card Payments’ and the other table will show your average annual ‘Cost of Accepting Card Payments’ by card type.

The table below shows an example of how this table will appear in your statement.  The rates shown below are examples only – you will need to refer to your June 2017 statement to find the rates relevant to you.

Annual Cost of Accepting Card Payments

Any surcharge you apply to card payments cannot exceed your average annual cost of acceptance. Your rates below, for year 2016-2017 can be used for determining this cost and ensuring your surcharges are not excessive.
 

  Mastercard
Credit
Visa
Credit
Mastercard
Debit
Visa
Debit
eftpos UnionPay International
Net Sales
$10,000 $10,000 $10,000 $10,000 $10,000 $10,000
Fees Charged $90 $92 $50 $48 $13 $120
Average Cost 0.90% 0.92% 0.50% 0.48% 0.13% 1.20%

If you accept American Express, you will need to refer to your American Express statement to see your ‘Cost of Acceptance’.


Complying with the new rules

If you currently apply a surcharge to card payments, you will need to be compliant with the new rules by 1 September 2017. The below steps should help you apply the new rules.

1. Finding your annual ‘Cost of Accepting Card Payments’.

Your annual ‘Cost of Accepting Card Payments’ for each card type will be shown on your June statement issued annually in early July.

The amount shown is the maximum percentage surcharge you will be able to apply to a customer’s transaction if they pay by card. If you wish to surcharge customers more than this amount, you’ll need to provide proof of how you incurred those additional costs, or potentially face a fine.

The ‘Cost of Accepting Card Payments’ table will take into consideration all fees charged on your main merchant statement, plus any fees charged by the bank that are statement separately, including:

  • UnionPay International fees,
  • Stationery and authorisation fees


If you accept American Express, you will need to refer to your American Express statement to find your ‘Cost of Accepting Card Payments’ for that card type.

2. Applying your annual ‘Average Cost of Accepting Card Payments’ as a surcharge.

You should review your surcharge rates once you have received your June statement detailing your annual ‘Cost of Accepting Card Payments’.

Here are some examples of how you can apply the new surcharging rules.
 

This option is recommended if you only want one surcharge for customers that pay by Mastercard and Visa, and another surcharge rate for eftpos and UnionPay International.

 

Card scheme Annual Cost of Acceptance %
Mastercard Credit 1.30%
Visa Credit 1.32%
Mastercard Debit 0.60%
Visa Debit 0.58%
Use this rate for all Mastercard and Visa transactions
eftpos 0.15%
Use this rate to apply a rate for eftpos
UnionPay International 1.60%

In the example above, 0.58% is the lowest ‘annual cost of acceptance’ across Mastercard and Visa. This is maximum surcharge you can apply to surcharge one rate for Mastercard and Visa. You can still apply a surcharge of 0.15% for all eftpos cards. The rates shown above are examples only – you will need to refer to your June statement to find the rates relevant to you.

 

This option is recommended if you want to surcharge one rate for credit card and another for debit card.

 

Card scheme Annual Cost of Acceptance %
Mastercard Credit 1.30%
Use this rate to apply one rate for all credit cards
Visa Credit 1.32%
Mastercard Debit 0.60%
Visa Debit 0.58%
Use this rate to apply one rate for all debit cards
eftpos 0.15%
Use this rate to apply a rate for eftpos
UnionPay International 1.60%

In the example above, 1.30% is the lowest ‘annual cost of acceptance’ for credit cards and 0.58% is the lowest ‘annual cost of acceptance for debit cards. These are the maximum amounts you can surcharge if you apply one rate for credit cards and another rate for debit cards.  You can still apply a surcharge of 0.15% for all eftpos cards.   The rates shown above are examples only – you will need to refer to your June statement to find the rates relevant to you.

 


3. Updating your surcharges.

Once you have reviewed your June statement, it is time to review and update your surcharge rates if they are above your annual ‘Average Cost of Accepting Card Payments’.


Here’s how we can help.

A. Enable ‘auto-surcharging’ on your EFTPOS 1 terminal.

We’ve made it easy for your EFTPOS 1 terminal to automatically add a surcharge, depending on the payment card your customer uses, through the ‘auto-surcharge’ function on your terminal. This will save you having to manually work out the correct surcharge to apply.


How to enable EFTPOS 1 auto-surcharge:

  1. Call the Merchant helpdesk on 1800 066 244
  2. Have the surcharge rates you’d like to apply close by, you’ll be asked for these. For any figure above the figure on your monthly statement, you’ll need to keep further proof of those costs incurred
  3. The rates will automatically be applied by your EFTPOS 1 terminal.
     

Auto-surcharging is not available on contactless transactions.

B. Update your Payment Gateway.

You’ll need to ensure you’ve updated your Payment Gateway with your new surcharge rates.

1.      To update, Westpac PayWay, first log in to your admin console and then input your preferred surcharge rates.
 

If you use a Third Party Payment Gateway provider, then you should contact them directly to update your surcharges for the different card types. Please click here for a list of Third Party Payment Gateway’s that are accredited with Westpac.

 


Facts about surcharging

We understand your need to manage your business expenses. One way to do this is by surcharging customers who pay by card. While surcharging may seem beneficial for your business, almost 1 in 2 customers have abandoned a purchase in order to avoid a surcharge.1

Cash

Cash is often seen as the cheapest payment method, however there are a number of additional costs such as the time it takes for a shop assistant to count the change when a customer pays by cash. Contactless payments may actually be cheaper for your business to accept due to the speed at which a customer can be served and their purchase processed.

Digital revolution

In the last few years, there has been huge growth in digital technologies such as contactless payment systems.  Customers are increasingly using contactless payment methods such as tap and pay on their mobile devices and wearables. Australia is leading this trend, with the highest number of people who understand and make contactless payments in the world. 

 

By removing surcharges, it may help give you an edge over competitors who surcharge customers who pay by card, by providing a more favourable customer experience.

 


Frequently asked questions

A merchant who decides to apply a surcharge to a particular type of card payment may not surcharge above their cost of acceptance for that card type.


The Reserve Bank of Australia (RBA) has now clearly defined what costs can be included in the cost of acceptance calculation, and the Australian Consumer and Competition Commission (ACCC) now has monitoring and enforcement powers to ensure that merchants do not excessively surcharge.

These changes apply to all merchants, but only affect those that currently apply or intend to apply a surcharge to accept payment by credit and/or debit card (whether in person, online, over the telephone, or via mail order).

The following card payment schemes are covered by the surcharge changes:

  • Mastercard Debit and Prepaid
  • Mastercard Credit
  • Visa Debit and Prepaid
  • Visa Credit
  • eftpos Debit and Prepaid
  • American Express* cards issued by Australian banks.
     

* Westpac Group is not an acquirer for American Express – merchants that accept American Express payment scheme cards should contact American Express directly with any questions relating to this matter.

  • American Express proprietary card system (i.e. not issued by Australian banks)
  • UnionPay
  • JCB
  • Diners Club
  • Discover Card
  • Any other systems not covered in question 4 above.

The ACCC has already begun monitoring surcharging by large merchants (as defined below) from 1 September 2016. A large merchant is one that satisfies two or all of the following:

(a) the consolidated gross revenue of the merchant and its related companies for the financial year ended 30 June 2015 was $25 million or more;

(b) the value of the consolidated gross assets of the merchant and its related companies at 30 June 2015 was $12.5 million or more;

(c) as at 30 June 2015 the merchant and its related companies between them had 50 or more employees (whether full time, part time, casual or employed on any other basis).
 

All merchants will be monitored by the ACCC from 1 September 2017.

You are permitted to recover the following costs when applying a card payment surcharge:

  • Merchant service fees charged by an acquirer or payment facilitator in relation to a card transaction.
  • Payment terminal rental and maintenance costs paid to the merchant’s acquirer, payment facilitator or payment service provider.
  • Fraud-related chargeback fees paid to the merchant's acquirer or payment facilitator.
  • Gateway or fraud prevention services fees paid to the merchant’s acquirer, payment facilitator or payment services provider.
  • Cost of insurance for forward delivery risk, incurred by the merchant, where that risk arises because the merchant accepts card transactions. This typically applies to agents (such as travel agents) who pay an external party to insure against the risk that the agent will be liable to a customer for the failure of a principal supplier (such as an airline or hotel) on payments accepted via cards.
     

A merchant wishing to include additional eligible costs not billed by their acquirer would need to be able to provide invoices, contracts or statements to support their calculation.

Westpac will provide you with the cost to accept each of the following card payment types on your monthly statement beginning in June 2017, and the final statement for the Australian tax financial year will provide you your cost for each scheme over the preceding year:

  • Visa Credit
  • Visa Debit and Prepaid
  • Mastercard Credit
  • Mastercard Debit and Prepaid
  • eftpos.

Westpac is not the acquirer for American Express companion payment cards, therefore it does not have visibility to the fees and charges levied on merchants. Westpac recommends that merchants contact American Express directly.

Westpac will provide you with your cost of acceptance for each card type from June 2017 in your monthly statement, however it is up to you to determine what surcharge you would like to apply. You may wish to include additional eligible costs that are not billed by Westpac in determining your final cost of acceptance.

Yes, however the applied surcharge must reflect only the cost of the lowest-cost card scheme/type.

For example, if the ‘Cost of Accepting Card Payments’ for Visa Debit was 0.80% and Visa Credit was 1.30%, then the highest blended rate that could be applied across all Visa payment cards would be 0.80%, which is the lower of the two Visa Debit and Visa Credit rates.

Surcharges must be percentage based or, if expressed as a fixed amount, must not be excessive for any relevant transaction amount. It is up to you to determine if a fixed dollar amount is suitable for your circumstances.

You should contact the Merchant Acquiring Helpdesk on 1800 066 244, Monday to Friday 8.00am – 8.00pm to update any surcharge rates that are automatically applied to card payment transactions through your EFTPOS 1 terminal. Alternatively, contact your terminal or gateway provider.

The new rules permit you to validate your payment costs once a year, and set your surcharge for the next year based on that information.

You will need to review your surcharge by 1 September 2017 and next in July 2018, when you will receive your next annual statement.

The ACCC has review powers in relation to excessive surcharging. They may require you to produce evidence of your cost of acceptance to justify the amount that you are surcharging customers. Evidence may include your annual cost of acceptance statement provided by Westpac. If you have included additional costs in your calculation you will need to keep invoices, contracts or other statements to justify these.

If the ACCC considers that your surcharges are excessive they may issue you with an infringement notice and require you to pay a penalty. Failure to comply with the infringement notice may also result in the ACCC initiating court proceedings against you.

The ACCC can require you or Westpac to provide information evidencing the amount of a payment surcharge and the cost of processing the relevant payment.

A merchant wishing to rely on a simple statement of acceptance costs will be able to rely on the annual statement provided by Westpac for a year after it is issued. You would need to be able to provide invoices, contracts or statements if you want to include additional eligible costs in case of investigation by the ACCC.

The Reserve Bank of Australia has provided an extensive list of questions and answers on their public website.  

The ACCC has provided compliance information and examples on their public website.

Things you should know
  1. RFi Group Payments Diary 2015.


The information provided on this page is general in nature and does not constitute advice on you circumstances. You should seek independent legal advice as to how these changes may affect you.

 

Click here to access the domestic eftpos Payment System BINs provided by eftpos Payments Australia Ltd.

 

World Mastercard®, Mastercard® and the Mastercard brand mark are registered trademarks, and PayPass is a trademark of Mastercard International Incorporated.

Visa is a registered trademark of Visa Worldwide PTe Limited.

American Express® is a registered trademark of American Express.