The way you use your debit card can be the difference between paying and avoiding surcharges.
While card surcharging is legally allowed for both debit cards and credit cards, some businesses have chosen to only apply an additional fee to credit transactions.
But both MasterCard and Visa debit cards could still attract this cost if they are processed as “credit” transactions on an EFTPOS machine.
Unlike other debit card fees, which are set and charged by your issuer, surcharges are established by merchants as a way of balancing out the fees they pay to process cards.
These costs, however, are at their most expensive for transactions processed as credit – which you can still select at the checkout when you use a MasterCard or Visa debit card.
But while that worked in the past, new contactless payments have added to the complications – as one Victorian pensioner recently found out when shopping at Aldi.
As News Limited’s local paper the Knox Leader reported, 72-year-old Barry Harvey paid for his groceries using MasterCard’s PayPass tap-and-go option before an additional 0.5% credit card surcharge was added onto his bill.
Aldi normally only charges the fee for actual credit cards – and has signs notifying customers of this fee – but when Harvey raised the issue with staff he was told that contactless payments defaulted to the credit processing system.
“They should explain it (in the signage), because then you get the option of using the tap-and-go and paying the surcharge, or putting it (the card) in the slot like you normally would.”
Coverage of the incident means more people now know about Aldi’s surcharge policy and how it could affect debit card transactions, but the grocery and variety store is not the only merchant charging more for credit than debit.
Data from the Reserve Bank of Australia shows that surcharges were applied to 9% of all card transactions in the 2012-13 financial year: 7% for credit cards and just 2% for debit cards.
This breakdown of stats suggests many other services waive fees for standard debit card transactions but could apply the surcharge by default for tap-and-go payments.
Why are tap-and-go payments different?
In order to make more informed decisions about how you use your credit card, it is important to understand all your options and how they can change.
MasterCard and Visa offer tap-and-go payments – also known as PayPass and PayWave – using the same processing system these two companies have set up for credit card transactions. This system costs more for merchants to use, which is why moderate surcharges are allowed in the first place.
Debit card transactions that use the “cheque” or “savings” option at a payment terminal, however, are processed through the EFTPOS system, which does not cost as much.
As a way of compromising on surcharges, some merchants will charge a fee for credit card payments but not debit card payments. What they may not realise, however, is that tap-and-go transactions have to be processed as “credit”, which means they have to notify customers of the surcharge for this option even if a debit card is used.
The newness of contactless cards also means that the only real way around the extra cost is to swipe or insert your card at the checkout, avoiding the contactless option.
But just as MasterCard and Visa worked hard to reduce and limit credit card surcharges in the past, they are committed to promoting PayPass and PayWave respectively. That means there is potential for them to try and find ways to keep debit card costs down in the future.
Rosie Smith
October 2, 2024I insert my card at point of sale and put in my pin number I’m told this cancels out or reduces fees for a debit / savings card. I noted that one large retailer when you place your card into the machine at point of pay all options including pin number are by passed and the transaction is auto approved no choice to select my account or to put in the pin. Is this legal ?
admin
October 9, 2024Hi Rosie, great question and I’m not 100% sure on the legal side of things. Was the purchase under $100? It might be that a transaction like that is automatically processed by that retailer as a paywave and the PIN was skipped. Which, as you said, is frustrating because it may mean fees were applied. If you wanted to dig in, you could start by asking the retailer which company looks after their point-of-sale.
Benedictus Postmus
June 18, 2024I always put my visa card in the slot and press savings and most of the time I get charged a surcharge. Should that be so?
admin
June 19, 2024Hi Benedictus, retailers can choose to charge a surcharge on card transactions to cover their own costs, since banks charge them a fee. Some retailers will absorb the surcharge. The only way to avoid it fully is to pay cash! Thanks Benedictus.
Dale
June 14, 2024Why is it that i get a surcharge when i insert my card and press savings, and it has no credit card attached to it ?
admin
June 19, 2024Hi Dale, it may be the retailer charging the surcharge, not your bank. You can call your bank to double-check where the surcharge is coming from. Thanks Dale!
Sue
June 8, 2024Hi, I used my debit card by inserting it and selecting ‘savings’ but I was still charged a 1.1% surcharge, is this correct
admin
June 12, 2024Hi Sue, surcharges can be charged by either the card provider or the place you’re purchasing from. This is to cover the cost to the merchant for allowing card payments. It can only be as much as it costs the business to take the payment. You can always follow up by asking your bank, but unfortunately surcharges are common these days.
Jen Evans
February 23, 2024Hello. I’ve just seen a notice at a Bakers Delight shop saying they will be adding a surcharge to your total spend and the machine will calculate it. Surely there would be a flat fee (which I refuse to pay on principle) not a percentage. The amount you spend shouldn’t matter. The idea of paying a percentage of you total makes me very angry, it’s stealing if you ask me. Do you think it was just the way the notice is written or will they charge a percentage of your total?
admin
March 4, 2024Hi Jen, yes, sadly merchants themselves are charged a surcharge (normally 1.5%) by the EFTPOS operator, and it’s up to the merchant if they decide to pass the surcharge cost on to the customer. Surcharges are usually calculated as a percentage of the total, sorry to say. Your Baker’s Delight may just be trying to stay afloat and recoup some of its costs while everything is so expensive, perhaps? Thank you for your insightful comment!
John
January 22, 2024In regards to card fees. Dont pay using a card, hence no fee. Use cash like we used to. My doctor charges a card fee as well as the consultation fee of $87 so now i hit the ATM next door & pay them cash. The Medicare rebate goes back into my acc that night.
admin
January 25, 2024Hi John, great tip – thanks for sharing. It’s always smart to avoid fees by paying cash, especially if you also get fee-free withdrawals!
Mary Hawker
September 6, 2023Can a shop charge a surcharge on a debit card which is a savings account it is my money they get straight away?
admin
September 8, 2023Hi Mary, some merchants can charge a surcharge to cover their own costs, but it’s not common anymore. You can read more directly from the ACCC here.
Jan Grimoldby
September 5, 2023The link to the information about WA and advertised price isn’t working. Can you please either fix or firmware to me? Or both?
admin
September 6, 2023Hi Jan, that link has expired and we can’t find anything similar to replace it. It’s likely the policies have changed, so we’ll update our article. Thanks!
Reginald sellers
August 21, 2023Can any business in Wisconsin add a surcharge on a debit card purchase and who do u notify about this problem
admin
August 23, 2023Hi Reginald, we’re an Australian site, but a quick Google suggests that surcharges are legal in the state of Wisconsin. You can read more about that here https://www.ncsl.org/financial-services/credit-or-debit-card-surcharges-statutes.
Ron
August 1, 2023I just checked Mt bank account and I got $60 of fuel and that’s what my receipt said but upon checking my account I was charged $60.30 . This is more than .5% is this legal??
admin
August 2, 2023Hi Ron, thanks for your message. The retailer can charge no more than it costs to process the transaction, usually around 1-3%. This is regulated by the RBA. The ACCC has more information on dealing with surcharges on payments.
alf girling
January 8, 2015on a dodo $10 a month plan they have a surcharge of $1.90 I thought debit cards were exempt
Amy
January 8, 2015Hi alf girling, unfortunately it depends on the company. Debit cards technically can attract a surcharge, particularly if it’s labelled as a “processing fee” (airlines famously do that). But legally there should also be a payment option that has no additional charge, so I’d recommend talking to Dodo about their payment options. Thanks, Amy