In an increasingly cashless society, many businesses face the decision of whether to apply surcharges on credit card transactions. While this practice can offset some of the costs incurred by credit card fees, it's essential to understand the legal framework and potential cost implications for your business.

Legal Framework on Credit Card Surcharges

Since 1st September 2017, new guidelines established by the Australian Competition and Consumer Commission (ACCC), imposes how businesses charge customers a fee that reflects the actual cost of processing the payment via credit or debit cards. This surcharge must not exceed the direct costs borne by the merchant, such as bank fees and terminal costs.

For detailed guidelines and legal specifics, businesses should refer to the ACCC’s official documents on payment surcharges, which provide clarity on permissible charges and the method of calculation. It is crucial for compliance and to avoid penalties to adhere strictly to these regulations.

The Hidden Costs of Implementing Surcharges

While on the surface, surcharging appears to be a straightforward way to recoup transaction costs, there are deeper implications that could affect your business financially:

1. Customer Dissatisfaction and Reduced Sales: Surcharge fees, even minimal, can lead to customer dissatisfaction. This negative experience may deter future patronage, especially if competitors do not apply similar charges.

2. Administrative Complexity: Implementing surcharges requires maintaining compliance with ACCC regulations, which involves calculating and validating surcharge levels against actual transaction costs regularly. This adds a layer of administrative complexity and potential costs in terms of time and resources. Note that fines apply should there be any miscalculation that is against the legal framework.

3. Impact on Transaction Values: There is evidence suggesting that surcharges can influence purchasing behaviours, potentially leading customers to spend less per transaction or switch to cash payments, which have their own handling costs.

Best Practices for Implementing Surcharges

To navigate the complexities of credit card surcharges effectively, consider the following practices:

• Transparent Communication: Clearly inform customers about any surcharges and their justification. Transparency can mitigate negative reactions by making customers feel informed and respected.

• Card fees applied automatically: There are so many cards that all have fees. Instead of selecting the lowest card fee for all cards, choose the right hardware that allows your business to automatically apply the surcharge that matches your customer's card fee.

• Customer Feedback: Engage with your customers to understand their views on surcharges and adjust your approach based on their feedback and purchasing behaviour.

Conclusion

Implementing credit card surcharges is not just a financial decision but a strategic one that impacts customer relationships and operational complexity. Before deciding to implement a surcharge, consider the broader implications on your customer engagement and overall brand reputation. For detailed information and compliance guidelines, always refer to the ACCC’s resources available on their website.

For more detailed information on how to setup surcharges, visit the following link - https://www.accc.gov.au/system/files/1193_Payment%20surcharges_FA_web03.pdf