The convenience of tapping your card instead of inserting or swiping could be costing Australians up to $1 billion a year in surcharges, with many unaware about the “hidden fees” behind the simple act.
Most of us now tap our cards to pay for goods and services without a second thought — the modern way of paying now ingrained in our daily shopping habits.
However, according to financial counsellor Scott Pape, AKA The Barefoot Investor, while tapping your card may be easier, it might not be great for your bank account.
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“What most people don’t know is that, when they tap, their bank generally defaults that payment through Visa or MasterCard, who pays them a fee — instead of defaulting that payment through the much cheaper bank-owned EFTPOS,” Pape said in his column for the Daily Telegraph.
While some businesses choose to absorb the cost, others pass it on to the customer as a surcharge.
“Talk about a rort,” Pape said.
Visa and Mastercard are generally more expensive for merchants than the EFTPOS network, according to the Royal Bank of Australia (RBA).
Payments through EFTPOS are usually about 0.3 per cent of the transaction value, while Debit Mastercard and Visa Debit may cost many merchants about 0.5 per cent.
Mastercard and Visa credit could cost merchants more than 0.75 per cent of the transaction.
American Express card payments are even more, charging merchants 1 to 1.5 per cent.
Earlier this year, Australian Small Business and Family Enterprise Ombudsman Bruce Billson said tap-and-go payments are costing businesses between $800 million and $1 billion a year in extra charges.
He said while the surcharges might not look like much on small payments, they really make a difference on large ones.
“When you get to a larger transaction, like paying for your car maintenance service or something like that, that can be a pretty big number,” Billson said.
How to avoid paying the “hidden fees”
There are ways to get around paying the extra fees, according to Pape.
If your bank card is attached to your phone, you can change the default payment setting.
“On an iPhone, open ‘Settings’, go to ‘Wallet & Apple Pay’, then tap your debit card,” Pape said.
“Then look for ‘Payment Option’. It will generally have ‘MasterCard’ or ‘Visa’ preselected, but instead you should select ‘EFTPOS SAV’.”
This is not allowed on all cards, however, and those who use Android will need to check with their bank if a possible solution exists.
The other way to avoid paying the surcharges is to just start inserting or swiping your card again.
“I know it’s annoying, but if you swipe and insert your card you can choose ‘cheque’ or ‘savings’ and it’ll go through the EFTPOS system, which at the bigger retailers means you’ll be less likely to be charged,” Pape said.