The Hidden Costs of "Fee Free" EFTPOS


29.03.2022 Payments Finances

The Hidden Costs of

Who covers the cost of cashless transactions with "fee free" EFTPOS?

Every time a customer uses a cashless payment, there is a small cost associated with processing that transaction. This transaction fee is charged by your payment services provider. Yet some providers offer “fee free” or “zero cost” EFTPOS — how does that work?

In simplest terms, fee free EFTPOS is a way to pass the cost of accepting cashless transactions on to the purchasing customer with a nominal surcharge. Many businesses surcharge their customers; it’s common. However, it can be confusing for both you and your customers if you don’t select the right service provider for your needs. More importantly, it can be damaging for your business reputation if you don’t understand how it all works. 

Let’s look at the facts about who’s paying the fees when using fee free EFTPOS, and what it means for your business.

What fee free EFTPOS really means

Some providers may advertise “fee free EFTPOS” or “zero cost EFTPOS”, but the problem is: free EFTPOS transactions do not exist. When a cashless transaction is processed, there is a cost for using technology to move funds from the customer's account to your business' — quickly and securely. Transaction fees are a necessary cost of modern-day business. 

Terms such as "fee free EFTPOS" and "zero cost EFTPOS" are simply used as a roundabout way of saying that the fees are passed on to the customer as a small surcharge, added to the transaction. Essentially, instead of your business incurring the cost of the transaction, your customer covers it at the time of payment. 

When you read:

  • "fee free EFTPOS" it means the processing fee is passed on to your customer as a surcharge.
  • "zero cost EFTPOS" it means the cost to your business is zero, because it is passed on to your customer as a surcharge.

These things are technically the same as an "automatic surcharge", which means the cost of accepting a transaction is automatically passed on to your customer as a surcharge.

Having the ability to accept cashless transactions safeguards your business from the drastic decline of cash; the majority of consumers no longer carry physical money. Using an EFTPOS terminal also comes with the added benefits of quicker deposits, easier funds management, simplified business banking and tighter security. However, it's important to read the fine print before you sign the dotted line. 

The problem with "free"

There are a number of issues with advertising so-called "fee free" or "zero cost" EFTPOS. Firstly, the naming suggests EFTPOS transactions are free — which is not true. Secondly, these services lock merchants into surcharging customers. Third, and most importantly, merchants who sign up for these schemes without realising their customers are actually covering the cost of their EFTPOS transactions via a surcharge could find themselves in hot water. 

If you are not able to identify these services for what they are, your business’ reputation is at risk. 

“Fee free” isn’t actually free

Every time a customer pays using a card or digital wallet, the business is charged a transaction fee. This fee cannot be avoided. It enables the digital transaction to occur using technology to complete a number of checks and balances, protecting both the customer and the business. 

If a business isn’t paying transaction fees, then its customers are.

Understanding the fees associated with EFTPOS transactions can be confusing. This is because every payment services provider sets its own charge rates, and some EFTPOS services come with hidden fees, charges and transaction limits. Depending on your provider, your transaction fee may vary according to the card or payment method being used, the type of transaction, or volume of payments your business processes each month. Other charges may include authorisation charges, installation or maintenance fees, and terminal rental fees. To learn more about EFTPOS transaction fees, read our article on deciphering transaction fees.

Zeller Terminal is yours to keep when you purchase a Zeller Kit. There are no hidden charges or terminal rental fees to worry about. A simple, flat transaction fee of of 1.4% applies to all in-person purchases. 

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You’re locked in to a contract

Fee free and zero cost EFTPOS plans lock you in, often for a one-off fee. This means you cannot remove the surcharge without help from your financial services provider, which will likely involve lodging a formal request and then waiting for it to be actioned. 

At Zeller, we believe business owners should have the flexibility to toggle surcharging on or off with ease — as and when it suits their business. It should be as simple as flicking a switch.

Legally, your customers need to know

Transparency is important. No one likes hidden fees — and that includes your customers. 

As a merchant, if you choose to surcharge your customers, you have a legal obligation to display appropriate signage. That signage must be placed in an area where customers are likely to see it. The rules are clear: customers should know that they are paying an additional fee to process the transaction digitally. That way, they have the option to use another method if they wish. 

Each state has its own relevant laws to comply with. The onus is on every business owner to familiarise themselves with what’s required. 

Introducing a surcharge to your business doesn’t have to be a headache, providing you have the right payment solution and are aware of your legal responsibilities. Zeller makes it easy to cover your cost of acceptance with automated surcharging.  

How to pass your transaction fees on to customers

First, you should familiarise yourself with the rules that are there to protect consumers from excessive surcharging by businesses. 

In a nutshell, the rules laid out by the Reserve Bank of Australia stipulate three key responsibilities when adding a surcharge to your transactions.

  1. You cannot pass on a charge greater than the one you incur.
  2. You must review your surcharge at least once a year.
  3. You must display appropriate signage about the surcharge.

We’ve simplified the process of surcharging for our merchants. No matter how your customer chooses to pay, a low, flat transaction fee of 1.4% applies to every in-person transaction — taking the guesswork out of calculating surcharges. You can then toggle surcharging on, via Zeller Terminal or Zeller Dashboard. It’s the simplest way to ensure you’re recouping the full cost of transactions, while meeting your merchant obligations. 

Zeller also makes it easy for you to have complete control of what costs you pass on to your customer, without being locked into a long term arrangement. Simply log in to your Zeller Dashboard to toggle surcharging on or off at your convenience, or set a new custom surcharge. For more information about how surcharging works with Zeller, read Smarter Surcharging: Apply a Custom Surcharge with Zeller Terminal

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