Debit Card Surcharges in Australia

Did you know that surcharges can also apply to debit card transactions? Surcharges are meant to cover the costs a merchant incurs for processing your payment, and Australia has laws in place to ensure you won’t be hit with excessive fees the next time you pay with your debit card.

Credit card surcharges are one of the most annoying things about shopping with plastic. Depending on the type of card you use and the merchant you buy from, you could be slugged with a surcharge anywhere between 0.5% and 3% of your total transaction amount.

What are debit card surcharges?

Whenever you buy goods or services using a debit, credit or prepaid card, the merchant will incur its own bank costs for processing that payment. Some merchants will include those processing costs in the fee they charge for goods and services, but others will cover their costs by imposing a surcharge on card-based transactions.

A debit card surcharge is an additional amount a business charges when you pay for a purchase using your debit card rather than another payment method, for example, cash.

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The HSBC Everyday Global Account is one of the best bank accounts for travelling as it has no account keeping fees, no international transaction fees and access to free ATMs around the world. You can hold up to 10 different currencies in the one account, which allows you to top up on a currency while the exchange rate is good, then spend in that local currency while you're overseas. Plus, earn 2% cashback on tap and pay purchases (T&Cs apply).

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Name	Monthly fee	Govt. Guarantee	Own network ATM fee	Card type
HSBC Everyday Global Account Finder AwardApple Pay Google Pay10 Currencies	Monthly fee $0	Government Guarantee	Own network ATM fee $0	Card type Visa	Go to siteMore Info Compare	Earn 2% cashback on tap and pay purchases.
MyState Bank Glide Account Apple Pay Google Pay Samsung Pay Fitbit Pay Garmin Pay	Monthly fee $0	Government Guarantee	Own network ATM fee $0	Card type Visa	Go to siteMore Info Compare
St.George Complete Freedom Account Apple Pay Google Pay Samsung Pay	Monthly fee $0	Government Guarantee	Own network ATM fee $0	Card type Visa	Go to siteMore Info Compare
Suncorp Everyday Options Account Apple Pay Google Pay	Monthly fee $0	Government Guarantee	Own network ATM fee $0	Card type Visa	Go to siteMore Info Compare
Westpac Choice Apple Pay Google Pay Samsung Pay Fitbit Pay Garmin Pay Digital Card	Monthly fee $5	Government Guarantee	Own network ATM fee $0	Card type Mastercard	Go to siteMore Info Compare
Up Everyday Account Apple Pay Google Pay Samsung Pay Fitbit Pay Garmin Pay	Monthly fee $0	Government Guarantee	Own network ATM fee $0	Card type Mastercard	Go to siteMore Info Compare
Great Southern Bank Everyday Edge Account Apple Pay Google Pay Samsung Pay	Monthly fee $0	Government Guarantee	Own network ATM fee $0	Card type Visa	Go to siteMore Info Compare
Bendigo Bank Everyday Account Apple Pay Google Pay Samsung Pay Fitbit Pay Garmin Pay	Monthly fee $6	Government Guarantee	Own network ATM fee $0	Card type Mastercard	Go to siteMore Info Compare

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How much are debit card surcharges?

According to the Reserve Bank of Australia (RBA), the cost of processing a debit card transaction is usually quite low. Accepting a Visa or Mastercard debit transaction will typically cost a business around 0.5% of the transaction value.

However, prior to 2016, merchants were free to choose the surcharge amount they imposed on different card transactions, so there may have been instances where you’ve been slugged with a surcharge well above 0.5%.

The RBA also points out that processing credit card transactions usually results in higher expenses for businesses, with costs of up to 1–1.5% for Visa and Mastercard credit card transactions and 2–3% for payments made with an American Express credit card. As a result, credit card surcharges tend to be higher than debit card surcharges.

What about if I use payWave or PayPass?

Where matters get even trickier is if you pay for purchases using Visa’s payWave or Mastercard’s PayPass feature. This is due to the fact that tap and go (or contactless) transactions are processed through the same system used for credit card transactions – so even if you tap and go using your debit card, you may be hit with a higher credit card surcharge.

For example, many shoppers are unaware that Aldi’s 0.5% credit card surcharge also applies to contactless payments made with a Mastercard or Visa debit card.

When shopping at a store that applies a surcharge to credit card transactions, you can avoid this additional fee by steering clear of contactless payments. Instead, make sure to swipe or insert your debit card at the payment terminal.

How to avoid debit card fees and surcharges

Fortunately, debit card fees have decreased a lot since 2016, when EFTPOS surcharge laws in Australia changed.

Legislation was introduced in February 2016 to stop businesses imposing excessive surcharges on debit, credit and prepaid card transactions. The Competition and Consumer Amendment (Payment Surcharges) Act 2016 was brought in to stop businesses charging customers more than what it costs them to process the payment.

Under the legislation, if a business chooses to impose a payment surcharge, it is only legal to pass on to the customer the costs incurred by the business for accepting that particular payment type.

If a merchant imposes these types of fees and they are payable only on certain payment methods (such as credit cards) but not on others, the ban still applies. If the handling fee applies regardless of the payment type (eg a handling fee on a concert ticket purchase), that's allowed.

Note that there are some payment methods not covered by the ban, such as PayPal, BPAY, Diners Club cards, American Express cards issued directly through American Express, cheques and cash. The ban also doesn’t apply to payments made for taxi services, which are the responsibility of regulators in each individual state.

These days, the only fees you'll pay are the small fees incurred by the business, which is generally around or less than 0.5% on a debit card. Every merchant or seller is legally allowed to charge these fees, so to avoid those fees altogether, you may need to pay with cash, or find a a debit card with no transaction fees and/or no foreign transaction fees.

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