Understanding Transaction Fees and Surcharges in Australia

As a merchant doing business in Australia, it's important to understand how credit card transaction fees and surcharges work. Here at Pebl, we prioritise transparency and strive to provide clear, comprehensive information to help you navigate this topic. In this article, we'll break down how transaction fees affect your revenue and explain why you might receive slightly less than your original sales amount due to regulations set by the Reserve Bank of Australia (RBA) and the Australian Competition and Consumer Commission (ACCC).

Key Points on Payment Surcharges 

Merchants operating in Australia are required to comply with all laws relating to the application of surcharges on card payments. The Australian Competition and Consumer Commission (ACCC) has established new regulations prohibiting businesses from imposing excessive surcharges for different payment methods.

While surcharges are permitted, they must not be excessive.

This implies that any surcharge you impose should not exceed your cost for processing the payment — you can refer to the fees listed in your monthly statement, accessible via your Pebl app (mobile or desktop), for this information.

Labelling surcharges as service or handling fees is not permissible.

Businesses cannot circumvent the new restrictions by charging a "service" or "handling" fee on certain card payments. Such a practice would essentially constitute the application of a surcharge.

The prohibition doesn't prevent price adjustments.

In setting the prices for your goods and services, it's important to consider all operational costs to maintain a sustainable profit margin. Just like any other business expense (including rent, storage, or staff costs), payment processing fees should be included when establishing the most suitable pricing model for your business.

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Card Payment Processing Fees

Each time a customer makes a purchase using a credit or debit card, payment service providers like Pebl charge a small fee to process the transaction. For Pebl, this fee is currently 1.80% per transaction. This fee covers costs associated with fraud prevention, network maintenance, and other operational expenses necessary for the secure processing of card payments and keeping Pebl’s app and platform free of monthly fees or set-up costs.

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Surcharging Customers to Cover Costs

In an ideal world, you'd pass these processing costs directly onto your customers by applying a surcharge to each transaction. Theoretically, this would mean if you sell a product for $100, you would receive exactly $100, as the surcharge would cover the payment processing fees.

However, according to the regulations set by the RBA and the ACCC, merchants in Australia are not allowed to surcharge customers more than what they are being charged to process a card payment. In other words, the maximum surcharge you can apply is 1.80% per transaction.

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Why You Might Receive Less than the Sales Amount

Here's where it gets a bit tricky. Due to the way percentages work, the 1.80% surcharge doesn't perfectly offset the transaction fees, resulting in you receiving slightly less than the total sales amount.

Here's why: The 1.80% fee is calculated after the surcharge is added, meaning it's applied to a slightly larger amount. Consequently, the total fee is a bit more than the surcharge.

To ensure you receive the total sales amount (e.g., $100), we would need to increase the surcharge. However, this would go against the RBA and ACCC regulations, which clearly state that the surcharge cannot exceed the cost charged to the merchant for the payment processing.

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In Summary

While the effect on individual transactions might seem minimal, we understand these costs can add up over time and volume. We encourage you to factor these small fees into your pricing strategies. At Pebl, we're committed to keeping our processing fees as low as possible while providing a secure, efficient service.

Alternatively, you can turn surcharging on/off in your payment settings or payment review page. For any help, follow the instructions on our Surcharging article.

We hope this explanation provides some clarity on why you might receive slightly less than the original sales amount for card transactions. Please don't hesitate to contact us if you have any questions or concerns—we're here to help!

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