An Australian restaurant was found to be surcharging for cash and card and at wildly different rates. (Source: Reddit/Getty)
An Australian restaurant has been called out for slapping a surcharge on customers paying with card and cash. A traveller was on Victoria's Great Ocean Road when they stopped for some food in Lorne and noticed they'd be charged 3 per cent extra no matter how they paid.
If you were in on a weekend, you'd be forced to pay 10 per cent more, while a public holiday attracted 20 per cent. Swinburne University's Professor Steve Worthington told Yahoo Finance that charges like this are a joke.
"Surcharging for paying by cash is more than cheeky," he said. "It's actually pretty poor performance."
The 3 per cent surcharge at this venue only applies to payments made at the restaurant during the week.
While weekend and public holiday surcharges are common, adding a weekday surcharge for card and cash raises an ethical question.
It means that customers, regardless of when and how they pay for something, won't know the true cost of an item until they hand over their money.
While businesses incur an indirect cost of handling cash, Worthington said surcharges like that should be absorbed into the base price of goods and services, like other costs that businesses deal with.
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"If you're surcharging for how we pay, why don't you surcharge for your electricity costs, or your water costs, or for your staff that you employ, where do we stop with surcharges?" he said
"If we leave surcharging alone, people will start to take advantage of it, as evidenced here."
As the Reserve Bank of Australia (RBA) investigates the surcharging ecosystem, Worthington believes credit and debit charges need to be eliminated for customers.
While he admitted that might increase the cost of everyday products, it's the price to pay for a "simpler system".
Is surcharging cash legal?
Businesses are only allowed to surcharge customers the cost they're hit with for accepting certain payments.
If their card payment system incurs a 1 per cent fee every time someone taps their debit card, the business is allowed to pass that onto the consumer, but only that amount.
A 3 per cent surcharge for card purchases is well above the standard rate of 0.5 per cent to 2 per cent seen in many businesses and could be illegal under the rules set by the Australian Competition and Consumer Commission (ACCC).
Businesses usually set very clear rules around card payment surcharges. (Source: Facebook/Reddit)
"If there is no way for a consumer to pay without paying a surcharge, the business must include the surcharge in the displayed price," the consumer watchdog said.
"If a business wants to set the same surcharge for all payment types, it must not be more than the lowest surcharge they would set for a single payment type."
As for surcharges to use cash, the Australian Banking Association (ABA) revealed that notes and coins aren't exempt from the additional charge.
"Businesses must also be able to prove the costs they used to calculate the surcharge," it said.
"This ensures transparency and helps prevent excessive surcharging, which is illegal and can lead to significant fines and reputational damage."
Worthington urged Aussies to report businesses to the ACCC if they feel surcharges for card or cash are unreasonable.
The 'hidden' cost of cash for businesses
Because cash has been used in Australia for decades, it's seen as part and parcel of everyday life.
But a Boston Consulting Group found last year that there are three main "hidden" costs associated with handling, accepting, storing and depositing physical money.
Direct: This included the cost of having the money collected or provided by cash-in-transit businesses like Armaguard.
Indirect: This is related to instruments needed for physical money like a cash register, as well as issues relating to the transaction (for example, employee theft, cash handling errors, fraud, or other keying errors during the check-out process).
Back-office: These stem from the work required to reconcile payments (such as invoice reconciliation, cash register preparation, and depositing money into the bank).
The report estimated there's a 3.9 per cent cost per transaction for dealing with cash at the point-of-sale (POS) for businesses when you add up the three types of costs, compared to just 1.8 per cent for card payments and 5.3 per cent for buy now pay later services.
Could cash surcharging become the norm in the future?
Worthington said he's seen surcharges on cash increase in the last few months from retailers across the country.
With cash use declining, there is speculation that this could become the norm in a few years as businesses try to claw back the hassle of dealing in notes and coins.
The Reserve Bank of Australia facilitates the circulation of banknotes in Australia and governor Michele Bullock has raised issues with the cost of supporting a service that a dwindling number of people are using.
She told a parliamentary inquiry this week that cash will only be "around probably for another 10 years" and that a viable new system to distribute it needed to be considered.
However, stopped short of suggesting a surcharge on cash given it would not "go down well" with consumers.
Barefoot Investor author Scott Pape said he doesn't see an "end for cash" and envisioned a surcharge as a more likely outcome.
I do see a future where there is a surcharge on paying with cash,” the Barefoot Investor author Scott Pape wrote.
“It’s always puzzled me why paying for something with cash doesn’t carry a surcharge like cards do.
Barefoot Investor author Scott Pape reckons cash could incur surcharges more often in the future. (Source: Instagram/Canva)
"After all, there’s a huge cost to taking cash. Think of the shopkeepers who have to walk to a bank holding more money than a homie in a rap video. Or Armaguard, who have two pistol-packing blokes driving around in an armoured tank.”
Bullock said that "as a society" we need to consider how to ensure those who need access to cash have it.
"We’ve got to find a way of moving to a new system that means that distribution of cash can be undertaken and viable," she said.
