Australia has officially closed a legal loophole such that as of today, it is no longer legal to charge a credit card surcharge that is higher than the cost of taking the payment itself.  That adds up to about a 1.5 percent interchange fee for Visa or Mastercard, or just 0.5 percent for a debit card.

The change comes after a law banning “excessive” credit card surcharges was put into place last year, shortly after it became public knowledge that that Australians were paying out $1.6 billion in surcharges per year. Airlines were generally the worst offenders nationally — travelers were getting dinged with card fees in the range of $10, or about 17 percent of a cheaper flight price.

Coffee shops and cafes are the other big offenders, often tossing a 50 cent charge on top — or 14 percent of a $3.50 coffee. All in all, surcharges can add up to as much as 40 percent per month for one in six shoppers, with 47 percent of credit card users spending at least $20 per month on surcharges, according to data from American Express.

And consumers obviously don’t like it — 1 out of 5 shoppers in Australia noted that they would back out of a purchase if hit by a surprise surcharge.

Large businesses had to comply last September — small business had until today to get their acts together. As of now, any business that takes Visa, MasterCard, American Express or EFTPOS on cards issued by Australian banks are subject to the law.  Business owners who want to surcharge are now obligated to choose the lowest processing fee among the banks and set their surcharge to that.

“You can’t use an average of all payment methods or you will land yourself in trouble,” ACCC deputy chair Michael Schaper said. Businesses are not allowed to add on any of their own internal costs when calculating what surcharge they charge customers, according to Schaper.

Source: PYMNTS