The Commerce Commission is responsible for monitoring and providing some regulations for the Retail Payment System in New Zealand. In May 2023 they provided some guidance for businesses around surcharging and their expectations around what is deemed appropriate surcharging.
Accepting different payment methods can impose different costs on businesses and a surcharge is an extra fee charged to recoup any additional cost from customers where they choose to use a way to pay that is more expensive for merchants to provide.
They indicate that businesses have a key role in:
- Seeking advice from their payment service provider where they need clarification on how to surcharge
- Being transparent about and prominently displaying any surcharges (at the point of sale for in person payments and clearly displayed prior to payment for online payments)
- Offering at least one payment option that doesn’t attract a surcharge and ensure that their customers know that a surcharge can be avoided prior to the point of sale
- Ensuring that any surcharge doesn’t exceed the actual cost to accept the payment type offered
It is important to note the Commerce Commission guidance that appropriate surcharges should be no more than the additional cost for accepting that particular payment method or group of payment methods. In most cases, this will be the merchant service fee for that payment method.
Appropriate surcharging
To surcharge appropriately the Commerce Commission guidance is that you must:
- be transparent about the surcharge and the customer’s options ahead of paying it – customers should be made aware that a surcharge will be payable when they make a decision on which payment method to use, so they can decide whether to pay the surcharge or use a different method.
- provide your customers with at least one alternative payment method that does not incur a surcharge – where in-person payments are used, the option should be Eftpos and debit cards that are inserted and swiped as they do not incur any transaction specific costs.
- set surcharges so they do not exceed the additional cost of accepting the payment that the surcharge applies to. In most cases, this is likely to be the merchant service fee for those payments.
Appropriate surcharges can be different for different types of payments (eg, contactless debit vs. credit). Surcharges can also be the same for multiple payment options of a similar type (eg, all those payments where you pay the same fee).
If the business wants a single rate of surcharge for contactless debit and credit transactions, that surcharge should be no more than the weighted average of the fees for accepting those two types of payment (the per transaction cost). An example on this is provided here.