MasterCard, VISA and Maestro credit cards are seen in this picture illustration taken June 9, 2016.
MasterCard, VISA and Maestro credit cards are seen in this picture illustration taken June 9, 2016. Reuters/Maxim Zmeyev/Illustration

Credit card surcharges are now banned in Australia. The Australian Competition and Consumer Commission (ACCC) has put a stop to the excessive payment surcharges customers pay for using EFTPOS, Visa, MasterCard and American Express cards issued by Australian banks starting Sep. 1.

The ACCC cites a passage from the Competition and Consumer Amendment (Payment Surcharges) Act 2016, which bans excessive payment surcharges. The ban applies to all large merchants from Sep. 1. And from Sep. 1, 2017, the ban will also apply to all other merchants.

“Large merchants,” as defined by the Reserve Bank of Australia’s Standard, published May 26, refers to companies that satisfy at least two of the following: it has a consolidated gross revenue of $25 or more, its consolidated gross asset value is $12.5 million or more, or it has 50 or more employees.

“The new law limits the amount a large business can charge customers for use of payment methods such as most credit and debit cards. Businesses can only pass on the permitted costs of the payment method such as bank fees and terminal costs,” ACCC Chairman Rod Sims said.

“The new law has caused many large businesses to review their pricing practices. We expect to see a move from flat-fee surcharges for purchasing items like flights, towards percentage-based or capped surcharges.”

Sims added that the regulation authority is aware of the practice of some ticketing companies, which charge customers based on the payment method they choose. This is also banned.

As the law states, businesses can only pass onto customers the fees that cost them to process a payment when customers use electronic payment methods, such as EFTPOS, MasterCard, Visa and American Express cards issued by Australian banks. These fees include bank fees and terminal costs.

A surcharge is considered excessive when it exceeds the permitted cost of acceptance defined by the RBA.

According to the RBA, the costs to merchants of accepting payments by debit card is 0.5 percent, by credit card is 1 to 1.5 percent, and American Express cards is 2 to 3 percent. Some costs might be higher than these.

The payment types that are not covered by the ban include BPAY, Diners Club cards, PayPal, American Express cards issued directly by American Express, cash, and cheques.