Yahoo Finance Push to stamp out $4 billion card surcharge ‘rort’ hitting Aussies: 'Cash is fee free'
Labor MP Jerome Laxale is calling for fee-free digital payments and said Australia already has the technology to support this.
Aussies are paying billions of dollars a year in surcharges to use their card or other cashless methods to make payments. One politician hopes to make this “rort” a thing of the past and is calling for fee-free digital payments.
Labor MP Jerome Laxale said Aussies were paying up to $4 billion in card surcharges simply to “access their own money”. Digital payment methods have skyrocketed in recent years, with the pandemic accelerating the transition away from cash payments, and more businesses than ever are now charging customers a fee to pay with a credit or debit card.
“I do not begrudge small businesses for having to pass these exorbitant costs on, nor do I expect them to have to take on the cost overnight,” Laxale told Yahoo Finance.
“I question why we are all being charged fees at all. Cash is fee-free to use, so should digital.”
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Speaking in parliament last week, Laxale said other countries already had adopted fee-free digital payment systems, while Aussies were being stung by fees despite the technology already existing in Australia.
“The New Payments Platform owned by banks and big retailers and the RBA currently provides fee-free bank-to-bank fund transfers in an instant,” he said.
“Be it through Osko, PayID, scanning a QR code or new rules to open up Apple or Google wallets, unlocking the potential of the New Payments Platform is the answer to this $4 billion nightmare.”
Using parliamentary privilege, Laxale accused the banks and card providers of receiving “kickbacks” and claimed this was part of the reason why consumers were not getting fee-free payments today.
The Australian Banking Association has rejected this claim and noted there were costs involved with processing digital payments, including the rental of the payment terminal and ensuring payments were made safely and securely.
Aussies slugged with card surcharges
Analysis by Canstar found Aussies were paying an average of $140 a year in surcharges for opting to use electronic payments over cash. That adds up to $4 billion, a $400 million increase on the year before.
The Reserve Bank of Australia (RBA) estimated EFTPOS payments cost less than 0.5 per cent of a transaction to accept, Visa and Mastercard debit cards cost between 0.5 and 1 per cent, while Visa and Mastercard credit cards cost between 1 and 1.5 per cent.
Businesses can charge a surcharge for paying by card but there is a ban on excessive surcharging. That means they can’t charge more than what it costs them to process the transaction. Businesses cannot apply a surcharge if they don’t accept cash.
Businesses hit with ‘ridiculous’ fees
A number of Aussie small businesses have told Yahoo Finance they are now encouraging their customers to pay in cash to avoid “ridiculous” EFTPOS fees and charges.
Cards accounted for more than three-quarters of payments in 2022, with debit cards used for half of transactions. Cash made up just 13 per cent of payments, dropping from 69 per cent in 2007 and 27 per cent in 2019.
Laxale, a former small business owner, noted he previously paid more than $1,000 a month to accept digital payments. With business owners feeling the pinch from the cost of rent, electricity and other overheads, he said it was “just not feasible” for business owners to absorb these fees either.
Michelle Guilford, owner of Home Or Away Mechanical in Queensland, put up a sign urging customers to pay with cash if possible to help cut down on her business' EFTPOS fees.
“We pay between $4,000 and $5,000 a year in bank fees for the EFTPOS machine,” Guilford said. “As well as everything else going up in price, it's just ridiculous.”
Kosta Tzortiz, owner of IGA in Richmond, Tasmania, offers a 5 per cent discount to customers who choose to pay with cash. He said bank fees and surcharges were eating into business.
“You pay $50 by card by the time you do 10, 15 transactions there’s not much of it left with all the fees and surcharges,” he said. “Whereas cash is cash and 10, 15 transactions later it is still $50.”
Guilford “absorbs” the cost of the EFTPOS fees and does not impose a surcharge on customers. Tzortiz charges a 0.35 per cent surcharge to customers who pay with Visa or Mastercard credit cards.
The RBA has brought forward its review of merchant costs and surcharging. This will consider whether surcharging should be banned, as is the case in Europe and the UK.
Laxale will question the major banks about electronic payment before the House Economics Committee this week. He has started a public petition calling for fee-free digital payments.
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