Sneaky surcharges cost a pretty penny

Beers, pizzas and other everyday items are costing Australians a combined $1bn more a year than they should.

According to Reserve Bank economists, businesses and their customers are being ripped off by major banks and payment service providers that charge exorbitant transaction fees for purchases made with cards and mobile wallets.

The transaction fee rort, which has forced many businesses to recoup costs through customer surcharges, has prompted RBA governor Michele Bullock to step in, with the central bank threatening a crackdown unless uptake in least-cost routing is boosted.

Least-cost routing (LCR) refers to the practice where payments default to the least expensive processing network, rather than the pathway set by the bank or payment service provider.

“This should create greater competition between the networks and lead to savings for both merchants and consumers,” the RBA’s research finds.

RBA data shows that EFTPOS transactions are the cheapest, costing an average of 0.3 per cent – or 30c for a $100 purchase – to process.

MasterCard and Visa transactions cost approximately 0.9 per cent per purchase, while American Express and Diners Club card users are charged 1.3 per cent and 1.7 per cent.

Cost of accepting debit card transactions, Australia’s most popular payment method, are nearly 20 per cent lower for businesses that have LCR enabled, the research shows.

Despite LCR being made available to 99 per cent of businesses by June 2023, only 64 per cent have it turned on.