More businesses now applying surcharge on credit card payments

New research by industry analysts East & Partners reveals that more Australian merchants are now applying a surcharge to their customers’ credit card payments, while the average surcharge rate has remained static since June 2013.

New research by industry analysts East & Partners reveals that more Australian merchants are now applying a surcharge to their customers’ credit card payments, while the average surcharge rate has remained static since June 2013.

East’s bi-annual Merchants Payments report, compiled from interviews with 2,247 merchants of all sizes across all states in December 2013, shows that the average surcharge being applied was 2.1 per cent, unchanged since the previous report in June 2013, but down from 2.55 per cent in 2010. The number of merchants applying a surcharge is on the rise as well, up from 24.5 per cent in 2010 to 41.7 per cent in December.

According to the report, large institutional businesses turning over $725 million or more are more likely to be applying a credit card surcharge than smaller businesses turning over $1 to $5 million a year, with 65 per cent of the former and 32.8 per cent of the latter currently applying a surcharge.

And there is little difference between the two segments’ surcharge rates, with large institutional businesses applying an average surcharge of 2.1 per cent, and smaller businesses an average of 2.2 per cent. Since June 2013, however, institutional businesses have dropped their annual surcharge from 2.3 to 2.1 per cent, while small businesses have increased their average from 2.0 to 2.2 percent.

Reforms to surcharging from the Reserve Bank of Australia appear to be having an impact on merchant intentions to further increase surcharge levels too, with a declining 9.5 per cent saying they are “actively considering” an increase in the next year, down from 10.4 per cent in June 2013.

“The RBA reforms seem to be having an impact in terms of making businesses think twice before increasing surcharge levels, but we are not seeing much evidence that they are inclined to – on average – take them much lower,” Lachlan Colquhoun, Head of Markets Analysis at East & Partners, said.

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