Yahoo Finance Common cashless act ‘screwing’ Aussies: 'Most don't know'
Visa and Mastercard surcharges are estimated to cost Aussies $1 billion a year.
Aussies are being slugged with hidden fees when they make cashless payments using their phones. The Barefoot Investor revealed this common “rort” is “screwing” us out of $1 billion a year.
Tap-and-go payments have exploded since the pandemic, with Aussies now the biggest users of contactless payments in the world. But this convenience does come at a cost.
Finance guru Scott Pape revealed Aussies can be slugged with surcharges of up to 2 per cent when they pay by card, or tap-and-pay via their phone.
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“What most people don’t know is that, when they tap, their bank generally defaults that payment through Visa or MasterCard, who pays them a fee – instead of defaulting that payment through the much cheaper bank-owned EFTPOS,” Pape wrote in his latest column.
Reserve Bank of Australia (RBA) data shows EFTPOS transactions cost an average of 30 cents for a $100 purchase, or 0.3 per cent.
Mastercard and Visa debit transactions cost approximately 0.5 per cent, while Mastercard and Visa credit card transactions cost 0.9 per cent.
Diners and American Express cards are the most expensive networks, with average fees of around 1.3 and 1.7 per cent of the transaction value, respectively.
Pape said card surcharges could cost the average Aussie upwards of $200 a year. That amounts to $1 billion a year collectively, the Ombudsman said.
How can I avoid surcharges?
The good news is there are some quick ways you can try to get around the surcharges.
“On an iPhone, open ‘Settings’, go to ‘Wallet & Apple Pay’, then tap your debit card. Then look for ‘Payment Option’,” Pape advised.
“It will generally have ‘MasterCard’ or ‘Visa’ preselected, but instead you should select ‘eftpos SAV’. (Not all cards allow you to do this, and if you’re on an Android you’ll need to check with your bank because it’s a bit tricker apparently.)”
The other way is pulling out your physical card, instead of tapping.
“I know it’s annoying, but if you swipe and insert your card you can choose ‘cheque’ or ‘savings’ and it’ll go through the EFTPOS system, which at the bigger retailers means you’ll be less likely to be charged,” Pape said.
The warning comes after RBA governor Michele Bullock threatened a regulatory crackdown unless an uptake in least-cost- routing (LCR) is boosted.
LCR refers to the practice where payments are defaulted to the least expensive processing network, rather than the pathway set by the bank or payment service provider. As of June 2023, only 64 per cent of business terminals have enabled LCR.
Surcharges are becoming more prevalent, with the RBA finding there was a 77.5 per cent increase between 2019 and 2022 in the number of in-person payments by credit or debit card that attracted this additional fee.
It comes as cash use drops. The share of consumer payments made using cash has plummeted from 70 per cent in 2007 to just 13 per cent in 2022, according to the Reserve Bank.
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