Yahoo Finance Tradie's simple trick to avoid common $10 surcharge: 'Don't do that'
Ben urged everyone to insert their cards rather than tapping as the difference can be massive.
An Aussie tradie has revealed how much he saved with a little-known trick when using his card to pay for a big purchase. Card surcharges have been thrown into the spotlight recently after the CEOs of the big four banks were quizzed on whether they should stay or go in Australia.
The issue has been estimated to cost Australians from $960.26 million up to $4 billion a year, but Ben Smith told Yahoo Finance he'd found a way to reduce that burden. The Melbourne man was taken aback when he found out how much extra he was to be charged for a car service if he used his card.
"I went to pay for a car service, which was roughly like $550," he said.
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"I went to tap my card and the lady behind the desk just said to me, 'Don't do that because you'll be slugged with the service charge'."
Smith wasn't too concerned because he thought the charge would be less than a dollar.
But he was told the surcharge was a percentage of the purchase price and because the car service came with a hefty price tag, the charge was a little more than $10.
The staffer told him to insert his card and pay through the EFTPOS system, which incurs a much smaller charge and it ended up being around $2.
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The carpenter said it was "crazy" how much of a difference it can be simply for inserting or tapping your card.
He posted a video on social media about his experience and was blown away by how many people were also in the dark about this.
"A lot of the people on there basically said 'I had no idea that this was a thing', which is crazy because it's a subtle charge that no one would ever really think about," he told Yahoo Finance.
Card surcharges can be 'outrageous': Bank CEO
With the cost-of-living crisis continuing to affect Aussies' wallets, the seemingly tiny surcharges here and there can add up.
A recent analysis of Reserve Bank of Australia (RBA) data by the ABC found they were costing Australians roughly $960.26 million a year.
During a parliamentary inquiry, the head of National Australian Bank (NAB), Andrew Irvine, agreed that card surcharging needed a review considering how prevalent digital payments are now compared to cash.
"It's possible that surcharging was warranted over 20 years ago, but I think it behooves us to ask whether it still serves its purpose," he said on Friday.
"It just adds to confusion. It means I don't know what the price of a good is that I'm buying and I don't like it."
He added that he's seen some "outrageous" surcharges of up to 10 per cent, which is well above the 1-2 per cent that usually comes with tapping a credit or debit card.
Westpac chief executive Peter King similarly said the current system is a bit of a wild, wild west and doesn't pass the pub test in many cases.
"What we have is some merchants are charging fees above their cost, as there is no enforcement of the rules,” he told the hearing.
Other Aussies told Yahoo Finance that card surcharging has spiralled out of control and they should be banned.
"It's a pain when businesses want payment by card, then tack on the card surcharge on top of the purchase price," said one person.
"I say incorporate the cost in to the item or service provided. Don’t add the transaction charge afterwards," wrote another.
"Massive rort," added a third.
Labor MP Jerome Laxale has fronted a campaign for fee-free digital payments, also describing the system as a "rort".
“I question why we are all being charged fees at all. Cash is fee-free to use, so should digital.”
"The RBA currently provides fee-free bank-to-bank fund transfers in an instant.
“Be it through Osko, PayID, scanning a QR code or new rules to open up Apple or Google wallets, unlocking the potential of the New Payments Platform is the answer to this $4 billion nightmare.”
What's the difference between EFTPOS and other payments?
The Reserve Bank estimates Visa and Mastercard credit card payments incur an average cost of between 1 and 1.5 per cent.
For Visa and Mastercard debit card payments, it is 0.5 to 1 per cent, and for EFTPOS payments it is less than 0.5 per cent.
Other payment terminals can charge upwards of 2 per cent for every card payment and some businesses impose surcharges even higher.
These surcharges come from the banks or payment providers, who impose the cost on the business for the privilege of accepting cards. The business has the choice to either absorb it or pass it on to customers.
Most debit cards can either be processed through the EFTPOS system (which is done by inserting the card) or through the Debit Mastercard or Visa Debit networks.
"When a customer makes a contactless payment by tapping their dual-network debit card on a terminal, the transaction is automatically routed to the default network programmed on the card, which is typically the Debit Mastercard or Visa Debit network," the Reserve Bank said.
"These international networks are generally more expensive for merchants than the EFTPOS network."
Smith said his revelation has changed the way he uses his cards.
"The bigger chains like Woolworths, McDonald's, and that sort of stuff, they don't pass the charge on," he told Yahoo Finance.
"So if it's a big company, I still tap [my card] as they absorb the cost. But if it's anything small, I always now insert my card and just put my PIN in."
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