Aussies hit with "hidden fees" for using common payment method
Millions of Aussies have copped up to $1 billion in "hidden fees" for choosing to use one common payment method.
Many are unaware about the secret extra charges that come with using the tap-and-go payment method, as millions of customers use it as the preferred way to pay and go.
However, according to financial counsellor Scott Pape, also known as The Barefoot Investor, while tapping your card may be easier, it might not be great for your bank account.
“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, as Pape says, “Talk about a rort.”
According to the Royal Bank of Australia (RBA), Visa and Mastercard are generally more expensive for merchants than the EFTPOS network.
Payments through EFTPOS are generally about 0.3 per cent of the transaction value, while Debit Mastercard and Visa Debit may cost many some people about 0.5 per cent.
Mastercard and Visa credit could cost customers more than 0.75 per cent of the transaction, while American Express card payments are even more, charging merchants 1 to 1.5 per cent.
Thankfully, according to Pape, there are ways to avoid paying the extra fees.
If your bank card is attached to your smartphone, 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.
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