Reforms to Payment Card Surcharging March 2013

On 18 March 2013, a number of changes to the Reserve Bank's Standards relating to merchant surcharging took effect. These changes are aimed at improving the price signals that consumers face when choosing the payment method they use. The changes enable card schemes (such as American Express, Diners Club, MasterCard and Visa) to limit surcharges and address cases where merchants are clearly surcharging at a higher level than is justified. Merchants are nonetheless still able to fully recover their legitimate card acceptance costs.

The Standards allow card scheme rules to limit a merchant's surcharge to ‘the reasonable cost of acceptance’, which includes – but is not limited to – the merchant service fee that the merchant pays to its financial institution. The Standards therefore continue to ensure that merchants have the freedom to impose surcharges on the cards they accept, and that they can fully recover their acceptance costs. The changes are effective 18 March 2013. However, because limits on surcharging operate via changes to scheme rules, they only have an effect once scheme rules are amended.

The Reserve Bank has provided a Guidance Note to assist the card schemes and their participants to implement and comply with the amended Standards. The Guidance Note sets out the Reserve Bank's views on the costs, beyond the merchant service fee, that may appropriately be included in ‘the reasonable cost of acceptance’ if the merchant chooses to do so. It is the Reserve Bank's expectation that merchant service fees and other costs payable to the financial institution or card scheme that provides card acceptance services to the merchant will typically represent the bulk of the reasonable cost of card acceptance for merchants. However, the Reserve Bank recognises that in a limited number of cases, the ‘reasonable cost of acceptance’ may appropriately include other costs.