Radio host Matty Acton has called out the card surcharges Aussies are facing to spend their own money. (Source: Matty Acton/Stav, Abby and Matt)
A popular radio host is urging Australians to check before they tap their card, after he was shocked to be slugged with a significant card surcharge. Australians are spending an estimated $1.2 billion on card surcharges each year and it’s something the Reserve Bank of Australia (RBA) is looking to ban.
Matty Acton, who hosts the B105 radio show Stav, Abby and Matt, shared how he recently went to the butcher and purchased $119.11 worth of meat for a barbecue. When he tapped his debit card, the total cost went up to $121.08.
While $2 might not seem like much, Acton told Yahoo Finance the card surcharge worked out to be around 1.65 per cent of the transaction, which over multiple transactions could definitely add up over a year.
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“We’ve got a family of four living in our house, and then I have an older son who has a baby and a wife,” Acton said.
“So grocery bills and our incidentals are quite high and it’s the same for a lot of families. If you broke it down, a lot of families would be spending anywhere from between $500 to $1,000 worth of just card fees. If people looked at it, they’d be quite shocked at it.”
The RBA estimates the average adult spends around $60 per year on card surcharges, while Payment Services has put that cost closer to $140 per year.
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Acton said there was a lot of confusion among consumers around how card surcharge fees actually work and why they are a percentage rather than a flat fee.
“How does the digital amount have more involvement if there are no physical people or money to touch?” he said.
“Obviously, there’s the infrastructure of it and also security … I understand all that and also understand that nothing is free.
“But when you look up the figures, and especially when the biggest phrase in the world is cost-of-living crisis, why are we paying as Australians $1.2 billion for the luxury of spending our own money?”
Acton argued it meant Aussies were “being ripped off” when it came to using their own money.
Labor MP Jerome Laxale raised the same question in Parliament, questioning bank bosses why, when he bought a $5 coffee with cash, it cost him $5. But if he bought it on his debit card, it cost him $5.08.
According to Mastercard, the added cost is down to merchant service fees, which are the fees merchants pay to accept digital payments. It’s set and collected by their terminal provider.
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With the coffee example, 4 cents of that surcharge is the acquirer margin and goes to the merchant’s bank to cover the cost of providing card acceptance.
Another 2.4 cents goes to interchange fees, which are paid from the merchant’s bank to the cardholder’s bank.
The final 1.6 cents is the scheme fee, which goes to Visa, Mastercard and EFTPOS to cover the likes of processing costs, settlement and security tools.
These are the costs and fees that are baked into every card surcharge. (Source: Mastercard)
Businesses have been able to apply surcharges to card payments for years, but it is not supposed to be more than what it costs them to process the payment.
For small businesses processing less than $1 million in card transactions a year, RBA data found debit or EFTPOS processing costs were between 0.85 to 2 per cent, while credit was between 1 to 2 per cent.
Currently, businesses don’t pass on the cost of customers using cash and it is embedded into the price.
But a report commissioned by Mastercard and carried out by Boston Consulting Group found there were “hidden costs” to accepting cash, including handling errors, theft and transporting notes and coins to the bank, which it argued means cash costs twice as much as digital payments.
The RBA has proposed banning debit and credit card surcharges on EFTPOS, Mastercard and Visa card payments. It also wants to lower a cap on interchange fees paid by businesses to card providers.
The central bank estimates banning card surcharges could save consumers a total of $1.2 billion each year, while reducing interchange fees could save businesses $1.2 billion each year as well.
Restaurants, cafes and small businesses have raised concerns over the surcharge ban, fearing they would ultimately be the ones footing the bill, so they would need to raise prices more broadly to cover costs.
Acton told Yahoo Finance he would support the RBA’s card surcharge ban, but doesn’t think businesses should have to absorb the added costs either, which means they would likely have to work it into the price.
“It doesn’t really help the everyday person, though, does it? What it does is it doesn’t make it sneaky anymore,” he said.
“The answer is to use cash, but in a life of convenience, which is the era that we are in, it’s not that easy. There’s no ATMs around and banks are closing down as well.”
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