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Guide to credit card surcharges

Everything you need to know about credit card surcharges and how you can avoid them.

Credit cards are convenient, but using them can often cost you more money than other payment options. As well as regular charges from interest rates and annual fees, you may also have to pay a surcharge when you use your credit card.

These surcharges are usually transaction-based and can make a big difference to the total transaction cost. Here, we look at when these fees are charged, how much you can expect to pay and how to avoid credit card surcharges so that you have a payment option that works for you in every situation.

What is a credit card surcharge and when is it applied?

Surcharges are fees that merchants apply to your transactions to help them cover the cost of accepting a specific payment method.

For example, a business that accepts credit cards will be charged a fee for processing these payments. Depending on the card and type of transaction, this fee can range from 0.5% to 3% or more of the total transaction cost and is usually paid by the business to its bank. Businesses can choose to offset the cost of this fee through their pricing, or by applying a surcharge.

Payments that attract a surcharge

While credit cards often attract a surcharge, businesses can actually apply this fee to a range of different payment methods, including:

  • American Express (credit card, debit card and prepaid)
  • Mastercard (credit card, debit card and prepaid)
  • Visa (credit card, debit card and prepaid)
  • Eftpos (debit and prepaid)

Some businesses also apply a fee for other payment options, such as BPAY or PayPal. For example, Virgin Australia applies a surcharge for any airfare you buy with a credit card, debit card or PayPal.

It’s important to note that any business that includes a surcharge must let customers know before they pay. They also have to provide a fee-free alternative, such as cash or direct deposit.

Credit card surcharge reforms

The Australian government regulates most surcharges, including those for Visa, Mastercard and American Express companion cards. Over the past few years, the government has introduced a number of surcharge regulations to limit how much these fees can be. There have been two key surcharge reforms between 2013 and 2016:

The 2013 surcharge reforms

The Reserve Bank of Australia (RBA) introduced a law stating that businesses could charge customers for the “reasonable cost” of accepting electronic payments. However, it did not have clear guidelines for other payment fees, and many companies continued to charge flat-rate “service fees” for bookings. For example, airlines charged between $7 and $30 per booking made with a credit card.

The 2016 surcharge reforms

In February 2016, the government passed a law banning excessive payment surcharges and providing the Australian Competition and Consumer Commission (ACCC) with new regulatory powers. In conjunction with this law, the RBA specified that reasonable costs could only be up to the value of any fees the merchant paid as a direct result of accepting a specific payment method.

The RBA also required that companies provide detailed statements of “acceptable costs” in percentage terms and gave the ACCC investigative powers. As a result of these changes, the RBA expects that merchants applying a surcharge will use a percentage rather than a fixed dollar amount. It says this should lead to more affordable surcharges, particularly for lower-value transactions. These reforms apply to large merchants from 1 September 2016, while smaller merchants have until September 2017 to make appropriate changes.

hand on calculator

How much is a credit card surcharge?

The cost of a surcharge will vary depending on factors such as the business and the type of card. For credit card surcharges specifically, the cost is usually between 1% and 3%, but could be higher in some circumstances.

To give you an idea of surcharge costs – and the impact of the surcharge reforms – here’s what you could expect to pay for common transactions before and after 1 September 2016.

Booking flights

Prior to the RBA flat-rate surcharge ban, airlines were renowned for charging exorbitant credit card booking fees. There was previously a flat rate per flight and per person, but as of 1 September 2016, a percentage-based surcharge system has been introduced across the four major Australian airlines.

You can compare the old and new credit card booking fees charged by Qantas, Virgin, Jetstar and Tiger Air below.

Credit card surcharges before 1 September 2016

AirlineBooking and service fee* – Domestic flightsBooking and service fee* – International flights
Virgin$7.70Between $10 and $30
Jetstar$8.50Between $8.50 and $12.50

*The booking and service is fee is charged per person, per flight booked.

Credit card surcharges after 1 September 2016

Virgin Australiavirgin australia logo

Flight type Credit DebitPaypal Fee cap
Domestic and trans-Tasman1.3%0.6%$5.00$11.00
International short haul1.3%0.6%$5.00$70.00
International long haul1.3%0.6%$5.00$70.00

Tiger Airtigerair australia logo

Card type% charge
Mastercard Credit1.25%
Mastercard Debit0.86%
Visa Credit1.33%
Visa Debit0.88%

Jetstarjetstar logo

Card type% charge
Mastercard Credit1.06%
Mastercard Debit1.06%
Visa Credit0.48%
Visa Debit0.48%

Qantasqantas logo

Bookings made in Australia (per ticket, per cardCredit card feesFee cap (per ticket, per card)
Australian Domestic1.3%$11
Australian Trans-Tasman1.3%$11
Australian International1.3%$70

Air New Zealandair nz logo

Card type% charge
Credit card1.1%
Debit card0.75%

Singapore Airlinessingapore airlines logo

Card type% charge
Credit card1.45% per ticket (capped at AUD$70)
Debit card or other non-credit cardsNo charge

Cathay Pacificcathay pacific logo

Card type% charge
Visa/Mastercard1.35% per ticket (capped at AUD$70)
American Express, Diners Club, JCB, UATP1.33% of total ticket price (capped at AUD$70)

Emiratesemirates logo

Card type% charge
Credit card, PayPal1.5% per total ticket value (capped at AUD$70)
Debit cardNo charge

Jetstar is offering the most competitive surcharge rates of the Australian airlines following the RBA reform, but there might be some instances where you could end off further out of pocket following the 1 September 2016. Using the example of Virgin's surcharges (which match Qantas'), if you were taking a business class return flight from Sydney to London (Heathrow), you'd have to pay up to the $70 cap rather than the $30 flat rate that was in place before. However, you'd see savings on most domestic flights. While you would have had to have paid $7.70 on a return economy flight from Sydney to Melbourne worth $245.00, though, you'll only have to pay a booking fee of around $3.19 from September onwards.

For tips on avoiding surcharges altogether, see our guide on how to avoid booking fees when organising your next flight.

Paying for a taxi

The surcharge applied when you use your credit card to pay for a taxi varies from state to state and can be as much as 10% of your fare price. As individual state authorities regulate taxi fares, they are not subject to the new reforms and taxis can still apply higher surcharge fees.

The good news is that authorities in Victoria, NSW, WA, SA and the ACT are all limiting taxi surcharges to no more than 5% of the fare price. Other states and territories are also considering similar action.

Credit card surcharges for in-store or online purchase

As of 1 September 2016, the surcharges you’ll pay for credit card purchases in-store or online will be limited to the cost of accepting each payment method. In general, this will be between 1% and 3% of the total transaction cost.

Remember that any brick-and-mortar or online store that applies a credit card surcharge should clearly notify you before you make a payment. For example, if you’re shopping in-store, there should be signs at or near the checkout notifying you of any surcharges. Online, there is usually a similar notification of a surcharge for specific payment options. Remember, merchants also have to provide you with fee-free ways to pay, such as cash or direct deposit.

Other places you may have to pay surcharges

  • Ticket machines. You could have to pay a surcharge when you use your card to pay for parking at a ticket machine.
  • Events. Paying for event or concert tickets might require that you pay a surcharge. It’s important to note that surcharge regulations do not affect the “booking fees” that are applied regardless of the payment method used. The ACCC says there are no regulations to stop merchants from applying these fees, but they still need to be included in the advertised total price before a purchase is made in order to comply with Australian Consumer Law.
  • Utilities. Payments towards utilities and other bills can also attract surcharges.
  • Government payments. Payments to government bodies may also attract a credit card surcharge. For example, the Australian Taxation Office (ATO) applies a card fee based on the amount you pay and now says the fee will be based on the amount paid and the card used, and is “equal to the fee we incur from our banker”.
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How to avoid surcharges

While there are some instances where you have no option in paying a credit card surcharge, here are some ways you can avoid or reduce how much you pay in surcharges over time.

  • POLi. POLi, a wholly-owned subsidiary of Australia Post, is one of the country’s leading real-time, online payment methods. With Internet banking enabled on your credit card, you can choose to pay through POLi for airline tickets and more, and you don’t have to pay any surcharge when you use this payment method. Note that POLi transactions from a credit card could also be considered “cash advance transactions” and may attract additional fees as a result. Check to make sure your card provider allows this payment option from a credit account.
  • Use a debit card. Under the new surcharge laws, debit card payments will typically attract a lower fee than credit cards. For example, from 1 September 2016, Qantas will only charge 0.6% for bookings made with a debit card, compared to 1.3% for credit cards. In this case, you can halve the cost of a surcharge by choosing debit over credit.
  • Consider going to other businesses. In some cases, you may be able to shop around to find a merchant that charges reduced or no credit card fees. For example, some taxi companies charge as much as 10% for credit card payments, while Uber doesn’t apply any credit card surcharge and even allows you to link your card through the app for faster payment.
  • Link your card to PayPal. You can link your credit card account to PayPal and then use your PayPal account to make payments if the merchant provides this option as a fee-free alternative.
  • Booking flights with points. When booking flights with Virgin Australia and Tiger Air, you can avoid surcharge fees by booking your flight with Velocity Points rather than cash.
  • Vouchers. Some airlines and institutions don't charge payment fees when you use a voucher to make the purchase or booking.
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Frequently asked questions

The cost of a surcharge depends on a range of factors including the business, the cost of the transaction and the type of card you use. By taking note of when surcharges are applied, using alternative payment options or shopping around for a more affordable product or service, you can avoid paying, or at least reduce the cost of credit card surcharges, to make paying with plastic more affordable.

Images: Airline companies and Shutterstock

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Sally McMullen

Sally McMullen is an editor at finder.com.au who is a credit cards, frequent flyer and travel money expert by day and music maven by night.

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14 Responses

  1. Default Gravatar
    JulieDecember 9, 2016

    Hi I paid my rent with my credit card at Peard estate agents they charged 2.5% extra I used a HSBC visa credit card are they allowed to do this with the new laws??

    • finder Customer Care
      MayDecember 9, 2016Staff

      Hi Michele,

      Thanks for your question.

      Usually, merchants that accept credit card payments apply surcharges to your transaction. Depending on the card you use and the type of transaction, surcharges range from 0.5% to 3% or more of the total transaction cost. Although this is allowed, merchants should only charge that is at “reasonable cost”.


  2. Default Gravatar
    MargaretSeptember 9, 2016

    I am wondering why do car sales still get to charge surcharge for credit card payments or will they be under the new laws too? An extra $1000 on a $40000 car seems unfair and a little rich at 2.5% surcharge…will they look into regulating the car industry as well?…. I was charged $19.53 for vehicle inspection when vic roads requires them by law to do this prior to registering any vehicle & $10 for online vic roads reg fee, I didn’t choose for them to do it online.

    • finder Customer Care
      ArraSeptember 21, 2016Staff

      Hi Margaret,

      I’m so sorry to hear that.

      The RBA’s 2016 surcharge reforms only intend to minimise excessive credit card surcharges, not eliminate the fees. Merchants applying a surcharge will now be using a percentage rather than a fixed dollar amount, which leads to more affordable surcharges, particularly for lower-value transactions. You might want to read more about the fixed-dollar ban on this page.

      Also, if you think you have been excessively charged from the transactions you mentioned earlier, it would be best to discuss the matter directly with the provider of that product or service.

      I hope this has helped.


  3. Default Gravatar
    HamishMay 3, 2016

    if i pay for a new car on AMEX, what is considered a fair merchant card fee %?
    Visa I know will be around .8% on a 35K purchase.

    • finder Customer Care
      MayMay 4, 2016Staff

      Hi Hamish,

      Thanks for your inquiry.

      Apparently, American Express charges fees that are higher than Visa or MasterCard. As for AMEX Merchant Service fee, it’s subject to change at any time and it depends on the type of industry where the business belongs. You’d be best if you could directly inquire with AMEX the exact merchant service rate on car purchases. For your convenience, I’ve sent AMEX’s number to your email.


  4. Default Gravatar
    SamFebruary 25, 2016

    Is there a way to determine if you are using a credit card that will attract a premium surcharge?
    I understand that an Amex will attract one where a MasterCard or Visa will not, however if you have signed up to a premium credit card product with your bank such as Westpac Altitude Black, might the Black MasterCard be considered a premium card and attract similar surcharges to an Amex?

    • finder Customer Care
      JonathanFebruary 26, 2016Staff

      Hi Sam, thanks for your inquiry!

      There are no standardised surcharge fees with Westpac. Surcharges are administered by businesses. The senate is currently passing a bill to regulate credit card surcharges to ensure surcharges do not exceed 0.5% of the transaction.



  5. Default Gravatar
    PattyOctober 18, 2015

    Was charged by bank $103 for purchase of a Woolworth voucher worth $100 via PayPal. Who is charging the $3 since this is a local transaction? Bank, Woolworth or PayPal?


    • finder Customer Care
      JonathanOctober 19, 2015Staff

      Hi Patty, thanks for your inquiry!

      To investigate into the charges you have paid the transaction description on your bank statement can provide more information. A good place to start could be the Woolworths who is the merchant of your transaction.



  6. Default Gravatar
    carlaSeptember 1, 2015

    why was I charged $17 for a credit card fee with jetstar

    • finder Customer Care
      JonathanSeptember 1, 2015Staff

      Hi Carla, thanks for your inquiry!

      It is possible that the amount charged was a booking fee. It would be best to contact Jetstar directly to rectify this credit card fee. I have sent Jetstar’s contact details to your email.



  7. Default Gravatar
    KimJanuary 22, 2014

    If the expenses I incurred at the hotel is paid entirely by cash, is it correct to say the 1.5% surcharge does not apply? Thanks.

    • finder Customer Care
      ShirleyJanuary 22, 2014Staff

      Hi Kim,

      Thanks for your comment.

      Generally if you pay in cash there are no surcharges, however it is best to confirm this with the hotel staff.


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