Yahoo Finance Mechanic reveals brutal cost of cashless change: ‘$4,000 to $5,000 a year’
A Queensland mechanic said they are paying thousands of dollars on card surcharges each year.
A sign at a popular Aussie mechanic’s shop has revealed exactly how much paying by card can cost. Most Aussies are now opting for cashless payments and it can put an expensive burden on small businesses.
Home Or Away Mechanical in Queensland recently installed a notice urging customers to pay for services using cash if possible and to support “hard-working people” rather than the “big banks”. The Loganlea mechanics said it paid close to $400 per month on EFTPOS fees and associated charges.
“[We’re] just sick of the bank fees. We pay between $4,000 and $5,000 a year in bank fees for the EFTPOS machine to hire it and a percentage on every transaction,” owner Michelle Guilford told Yahoo Finance.
“As well as everything else going up in price, it's just ridiculous. We decided to put the sign up and it’s been a great success.”
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Guilford, who has run the workshop with her husband for the last 10 years, said they were facing higher costs for rent, electricity, wages and superannuation, parts and public liability insurance.
She said the business absorbed the added costs of accepting card payments, rather than passing them onto customers.
“We just absorb them. We’ve absorbed these charges for the last 10 years,” she said.
“You can’t just whack $100 on top of a service because people go elsewhere because it is a cutthroat industry. A lot of our customers are customers we’ve had for a long, long time.”
An Aussie cafe put up a similar sign for its customers and claimed a week’s worth of card surcharges amounted to a staff member’s daily wage. For Guilford, she said the monthly cost was equal to an apprentice’s wage for a three-day week.
Guilford estimated 60 per cent of customers paid by credit or debit card, 20 per cent by cash and 20 per cent by buy now, pay later services like Afterpay. But she said the number of cash transactions had increased since the sign was installed.
She said buy now, pay later was also an expensive method to accept, costing even more than EFTPOS.
“With the buy now, pay later fees, we paid $8,000 fees on that last year. We’re working about $12,000 a year in fees [in total],” she told Yahoo Finance.
“Unfortunately, with the buy now, pay later being in a low socio-economic area, we just have to suck it up. Because if we’ve got a car that comes in and the job is like $2,000, it’s easier for them to put it on buy now, pay later.”
Aussies lose $1 billion to surcharges
Reserve Bank of Australia (RBA) data found Aussies were losing nearly $1 billion a year to surcharges for paying with cards instead of using cash.
The central bank found 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.
Cash made up 13 per cent of total consumer payments in 2022, dropping from 69 per cent in 2007 and 27 per cent in 2019.
Dilemma facing businesses
RMIT associate professor of finance Dr Angel Zhong said businesses faced the dilemma of either copping the added costs themselves or passing them on to customers and potentially pushing them away.
“If you don’t impose the charges on your customers that means you will have to bear the costs,” Zhong told Yahoo Finance.
“In metropolitan areas, consumers embrace digital payments and they’re more accepting of the idea of card surcharges.
“Whereas in more remote areas, consumers still have a stronger preference for cash. So if businesses impose surcharges it will actually push their customers away.”
Swinburne School of Business and Law’s Professor Steve Worthington said businesses struggling with the rising cost of electronic payments needed to reflect that in their standard pricing, not through an extra charge.
“We are being asked to pay part of the electricity and part of the water and part of the wages, [and] now for payments. But these are costs that should be embedded in their prices,” he told Yahoo Finance.
“Surcharging seems to be a bit of an easy way of catching a little bit of extra money and must stop.”
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