• EFTPOS & Point of Sale Solutions

What is surcharging? Is it right for your business?

7 min. read12.10.2023

Passing on an EFTPOS transaction fee to your customer is increasingly becoming a favoured cost-saving measure for businesses navigating a tough economy.

With every card payment comes a fee, and whose side of the fence that should fall on – that of the customer or the merchant – is still very much up for debate. While it is the customer who decides what card they pull out, it’s the merchant who makes the call on the payment processor, the rates of which ultimately determine the fee. However, as businesses continue to be squeezed by rising costs, many are opting to pass on this fee to the customer, through what is known as surcharging.

While it is entirely legal to surcharge your customers, there are stringent rules in Australia to ensure that businesses don’t charge more than they should. What’s more, customer sentiment varies greatly across industries and geographies, and while you might get away with it at a metropolitan café, the same might not be said for a regional clothing store. In this article, we break down the practice of surcharging to help you make an informed decision for your business. Read on to find out what surcharging is, where and among what business types it’s most popular, what rules you need to abide by, and how you can enable surcharging on your Zeller Terminal.

Minimum card spend is out, surcharging is in.

The idea of making your customers pay for the convenience of using a debit or credit card is not new. We’ve all been in the situation where we’ve ended up buying something we didn’t need, purely to reach a business’s minimum EFTPOS requirement. The minimum card spend was introduced as a way for businesses to discourage customers from paying on card, so that they could avoid paying the transaction fee. At a time when people also held cash in their wallets, this practice made sense, but it’s fast becoming outdated, and frankly very frustrating. According to a 2023 report by the Reserve Bank of Australia, 76% of all payments in 2022 were made using debit or credit card. It’s becoming increasingly difficult – and counterproductive – for businesses to ask customers to pay with cash, and yet, someone still has to foot the bill for EFTPOS payments. This is where surcharging comes in.

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"My costs for five terminals across three locations were in excess of $5500 a month… So I said enough is enough. I'm done spending this sort of money on bank fees."

Kirsten Pitman, restaurant owner in Victor Harbor, South Australia

Kirsten Pitman, who owns several restaurants in Victor Harbor switched to Zeller, which charges one low flat fee of 1.4% per transaction, and began passing the cost onto her customers through surcharging. “Because we’ve saved so much money with our EFTPOS process, we haven't had to increase our prices and I feel like that's actually played into our favour in this current environment.

Three in five transactions now incur an EFTPOS surcharge.

According to Zeller data, nearly 60% of all transactions now include a surcharge. Since June 2021, the percentage of transactions with a surcharge applied has increased eightfold. Now, nearly three in every five payments that your customers make, include a card payment surcharge.

Surcharging-volume

Hospitality, transport and beauty are leading the (sur)charge.

Surcharging is most prevalent in the food and drink industry, with nearly 60% of hospitality businesses choosing to enable surcharging. This is followed by the transportation and beauty sectors where approximately 40% of businesses are choosing to pass on their transaction costs to the customer.

Surcharging is least prevalent in travel, education, and charities or member-based businesses, with less than 20% of them choosing to enable surcharging.

Surcharging-by-industry

The propensity to surcharge increases with business size.

Zeller data shows a direct correlation between annual turnover and the decision to surcharge. Businesses in their nascent stages — when the focus is on building a strong brand and establishing relationships with customers — are less likely to impose a surcharge. Whereas more than half of merchants with an annual turnover of $500,000 or more, choose to adopt the practice. It would seem that the surcharging strategy evolves over time, as businesses become more established, they become more confident that their customers will accept a card payment surcharge.

Surcharging-by-business-size

Victoria and New South Wales are setting the trend.

While 54% and 64% of businesses operating in New South Wales and Victoria, respectively, are surcharging, the rest of the country is yet to adopt the practice with the same enthusiasm. With the exception of Queensland where 43% of businesses are surcharging, in every other state it is still relatively uncommon, with less than 30% of businesses choosing to pass on their EFTPOS fees.

Surcharging by state-v2

Surcharging is also much more commonplace in metropolitan cities than it is in regional areas, with nearly 60% of metro-based Zeller businesses choosing to surcharge compared to just 33% of regional businesses.

Surcharging-by-region

The importance of understanding your cost of acceptance.

Before we get into the legalities of surcharging, it’s important to understand how EFTPOS transactions work. When a customer uses a credit or debit card to make a purchase, a number of fees are charged between your bank (or payment provider), your customer's bank and the payment card network (eg. Visa, Mastercard, or American Express).

The fee that you are charged to process the payment is entirely dependent on the type of card your customer uses, and it could be anywhere between 0.2% and 3.5%. Additionally, your bank may charge you terminal rental fees, account-keeping fees, or monthly service fees (learn more about The True Cost of EFTPOS Transaction Fees here). Together, these fees make up what is known as the ‘cost of acceptance’, that is, the expense incurred to accept a card payment.

Unless you are using a service such as Zeller, which keeps things simple with one low, flat fee of 1.4% per in-person card payment, it can be extremely difficult to calculate your cost of acceptance. Why this is important, is because, should you choose to pass on the cost to your customer, you legally cannot pass on a charge greater than the one you incur. In order to curb excessive surcharging, the Reserve Bank of Australia introduced the following legal obligations:

  1. Your surcharge cannot exceed your cost of acceptance

  2. You must review your cost of acceptance at least once every year

As a merchant, you have a responsibility to check your annual statement, to ensure your surcharge remains less than — or equal to — your cost of acceptance, and set your surcharge for the following year based on what you discover.

For Matt Bisaro, who runs Floral Craftsman in Sydney’s affluent suburb of Mosman, having one low, flat rate meant that he didn’t have to turn away customers wanting to use American Express, which traditionally incurs a much higher transaction fee.

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“My favourite thing with Zeller was that I got the same [fee] for AMEX. I used to have to refuse AMEX payments, and I lost people over it… Now you can add on that surcharge and no one thinks about it.”

Matt Bisaro, owner of Floral Craftsman, Mosman, Sydney

Customer perception and experience.

Even though public perception around surcharging is changing, it’s always important to tread with caution so as not to get your customers offside. When weighing up whether surcharging is right for you, consider the following:

  • Gauge whether surcharging is commonplace in your local area and within your industry. If so, it’s likely customers won’t even bat an eyelid at having to pay the extra few cents.

  • Ensure you are providing a smooth payment experience. If you’re charging customers for using a card, the payment process must be quick and effortless. Adding a surcharge on top of things like connectivity issues and processing delays will undoubtedly lead to frustration.

  • Make sure you display appropriate signage. Your surcharge signage must be clear and in public view, and where relevant should display the percentage or amount of the surcharge. Zeller Terminal keeps things transparent by displaying the surcharge on-screen during the payment process.

The alternative to surcharging? Lowering your EFTPOS transaction fees.

After taking into consideration your industry, your location, and your customers, you might decide that surcharging is not for you, which is completely reasonable. However, avoiding EFTPOS transaction fees altogether is becoming increasingly difficult as customers move away from cash. It’s therefore more important than ever to reassess your EFTPOS solution to ensure you are getting the best deal. With Zeller Terminal, you can own your EFTPOS machine outright, and will only be charged one low flat fee of 1.4% per in-person card payment. No hidden costs, no lock-in contracts. You can also speak to the Zeller Sales team about an even lower custom transaction fee, if your business is processing over $250K annually in card payments.

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“I’m very anti-surcharging… I understand that there might be a day when I have to start… but I think it’s more important to negotiate with the payment provider. With Zeller, we negotiated a great rate. I think it's on me to provide good service and that’s one way that I do it.”

Adele Arkell, owner of Radio Mexico, St Kilda, Melbourne

How do I start surcharging?

If you’re already using Zeller, surcharging can be enabled simply by toggling on the feature on Zeller Terminal or on your Dashboard.

If you are not using Zeller, you will need to check with your bank or payment provider. Bear in mind, some merchant services will only allow you to enable surcharging if you can meet minimum turnover thresholds every month, or will require you to sign a contract that locks you into using the functionality.

At Zeller, we believe in giving merchants the flexibility to run their business in the way that suits them best. That means having the ability to pass on your EFTPOS transaction fees in full or in part, and to turn the functionality on or off whenever you want to. There’s no contract to sign, or hoops to jump through.

Want to learn more about zero-cost EFTPOS?

Learn more here

Unwrap 3 More Ways To Get Paid This Holiday Season

It’s beginning to look a lot like Christmas, with streetscapes around the country adorned by oversized candy canes, inflatable Santas, and enough tinsel to tickle a reindeer’s nose. Naturally, all this fun, festive frivolity comes with increased consumer spending, and businesses can sometimes experience payment bottlenecks if they’re not prepared. 1. Take payments down the queue with Tap to Pay. Got a smartphone? Great, you’ve got a mobile POS terminal. Simply open up the Zeller App on your smartphone, hit the hamburger in the top left corner (the three stacked lines), enable ‘Tap to Pay’, follow the prompts, and you’re ready to accept contactless payments. Tap to Pay with Zeller App can be handy in so many scenarios. For example, if you’re running a one-off stall selling Christmas hampers at your local farmers market, you can accept payments directly on your phone. No EFTPOS terminal needed — it’s that easy.. Another example could be a fishmonger with a steadily growing queue of people lining up to buy fresh seafood for Christmas Day. While one staff member takes orders and accepts payments at the counter using  Zeller Terminal, another can walk down the line using Tap to Pay with Zeller App on a smartphone as a secondary POS. By reducing customer wait time, you’re helping to ensure fish-fans don’t get salty and move on to a quieter nearby competitor. 2. Lock in bookings or large orders with Zeller Invoices. Sending professional invoices has never been easier. Let’s say you run a restaurant and have just received a booking request for a large Christmas party. To accept a deposit payment to secure the booking, you’d open Zeller Dashboard, whip up an invoice in a few clicks (including detailing the payment terms), create a new contact, and send the invoice for the client to arrange pre-payment quickly and securely with their credit card. Or perhaps you’re a bakery taking Christmas pudding orders. You can fire off the invoice in a few clicks, and then be automatically notified when your customer completes their order payment. And if your customer was slow to pay, they’d automatically receive reminder emails to prompt them. We’re proud to say that 75% businesses using Zeller Invoices get paid in under 24 hours. 3. Take card payments over the phone and send payment links with Virtual Terminal. Zeller Virtual Terminal allows you to manually enter a customer’s card details they’ve given you over the phone, or send them a secure payment link via email or SMS, right from Zeller Dashboard. But what if you don’t have their email address or phone number? What if you’ve been communicating with your customer purely on social media? No worries, Virtual Terminal can handle that too. Let’s say you’re a handmade jewellery creator crafting cute Christmas-themed earrings for customers on Instagram and Facebook Marketplace. You would take an order via your DMs, add the payment details into Zeller Virtual Terminal in a few taps, click ‘Copy Link’ and shoot your customer the payment link back via DM. Quick, easy and efficient, the way it should be. So whether you’re a sole trader, a medium sized business or even running a bigger operation, hopefully this article has given you some fresh ideas on taking payments this Christmas and beyond. If you have any questions on any of these additional payment options available to you, log in to your Zeller Dashboard to try them out, or give our local team a call on 1800 935 537 and we’ll step you through the process.

Debit Cards vs. Eftpos Cards — What’s The Difference?

In Australia there’s often confusion between debit cards vs. eftpos cards. While the word EFTPOS can be used in multiple ways; in this instance we’re referring to the Australian debit card network, eftpos. While there are plenty of similarities between an eftpos card and a debit card, there are also a handful of important differences to be aware of when selecting a spending solution for your business. Read on to earn the difference between debit cards vs. eftpos cards. What is EFTPOS? The word EFTPOS stands for ‘Electronic Funds Transfer at Point Of Sale’, which is an in-person payment technology used to accept payments from customers for goods or services. You will frequently use an EFTPOS terminal when you’re shopping with your card or a mobile wallet. However when people talk about eftpos (with a lowercase ‘e’), they’re also referring to the privately run Australian debit card network. If you’re interested in learning more about how EFTPOS transactions work , you can discover the process behind every transaction, and how Zeller delivers seamless payments for your business at the article linked above. What are debit cards? Many business owners are familiar with the concept of debit cards. Debit cards are payment cards linked to your bank or business transaction account . Unlike a credit card, which withdraws funds with a pre-approved spending limit, a debit card withdraws money that is held in your account, reducing your balance instantly. Debit cards vs. eftpos cards Now you’ve got the background on debit cards vs. eftpos cards, let’s look at it in more detail. Australia’s eftpos system functions like a debit card system. Eftpos cards are linked to your business bank or transaction account, and when you spend funds using an eftpos card you are paying for those goods and services with funds held in your account. Therefore when it comes to debit cards vs eftpos cards — they’re more or less performing the same action. Some debit cards may have an approved overdraft limit, enabling the cardholder to spend beyond the balance of their business bank or transaction account limit. But in most instances when you’re spending on an eftpos card or debit card, your limit is defined by the balance held in your account. It’s important to keep in mind that eftpos cards can only be accepted within Australia, by merchants who have an EFTPOS machine set up to accept payments. You cannot use your eftpos card to spend outside of Australia. Differences between debit cards vs. eftpos cards The below table summarises some important differences between eftpos cards and debit cards. While the discussion on debit cards vs. eftpos cards can be confusing, for cardholders and merchants it’s important to understand the differences between each when deciding which card to use for your everyday business spending. Choosing the right debit card solution for your business If your business is searching for a convenient and affordable way to transact in-person and online, a Zeller Debit Card may be the perfect solution for you. Zeller Debit Cards are issued free, and give you the choice of transacting with virtual or physical cards. With no monthly fees or hidden charges, Zeller is the smartest and most affordable way to manage your business spending.

Getting Started with Zeller POS Lite: Your All-In-One Payments and Point-of-Sale Solution

Processing sales just got even easier with Zeller POS Lite — enabling you to deliver swift, hassle-free checkouts, and a smoother customer experience. Discover all of the features Zeller POS Lite offers below. Managing a small business involves a delicate balance of operations — overseeing inventory, processing payments, and tracking sales, all while keeping your customers happy. Without the right technology, operations and costs can quickly get out of control. Enter Zeller Terminal 2, our new all-in-one payments and  point-of-sale solution  designed and engineered in Australia to meet the unique needs of small businesses. At its core is Zeller POS Lite. Zeller POS Lite is a perfect ally for cafés, retail stores, food trucks, and market stalls –– businesses that need a reliable, easy-to-use POS system without unnecessary complexity or high costs. How will Zeller POS Lite benefit your business? Zeller POS Lite offers an all-in-one point-of-sale system to manage sales, items, and payments. It's easy to use and simple to set up — you can be up and running in minutes, with a complete item library and menu built right into Zeller Terminal 2. Designed for small, and mobile businesses, this free, easy-to-use POS solution records sales and delivers a fast and secure customer checkout experience. Interested in getting set up with Zeller POS Lite? Simply  purchase Zeller Terminal 2 online  and begin building your item library. If you need support or have additional questions, our local sales team is also available to discuss your POS requirements and help you get set up with the best solution. Is there a feature you’d like to see that’s not there? We’re always improving and adding to Zeller products, so if there’s a feature that is important to you that is not currently available, let us know at  feedback@myzeller.com .

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