Merchant Fees & Surcharges

Merchant fees are the charges businesses incur when accepting and processing electronic card payments from customers. Typically, these fees include a percentage of the transaction amount (e.g. 0.5-2%) ^*. They cover essential expenses such as fraud prevention, network infrastructure, and authorisation services. Essentially, you can think of merchant fees as small payments businesses make to banks and payment processors for securely delivering customers’ funds.

These fees are an essential consideration for Australian small-to-medium business owners and decision-makers managing payment processing costs, as they directly impact the bottom line.

Merchant fees typically consist of several components: 

• Interchange Fees are paid to the customer’s card-issuing bank. Interchange fees are set by the card schemes (e.g. Visa, Mastercard®, eftpos) as a mechanism to encourage card issuance and customer spending.  

• Scheme Fees are charged by card schemes to cover the cost of operating the card payment network. 

• Service Fees include charges from payment service providers (e.g. Tyro, Stripe, PayPal, NAB) for processing payments and providing support. 

• Chargeback Fees are incurred when a customer disputes a transaction and requests a reversal. These cover administrative costs related to handling the dispute. 

• EFTPOS Terminal Rental and Maintenance Fees are monthly or annual fees for leasing or maintaining payment terminals. 

• International Transaction Fees are applied when a customer uses a card issued overseas or pays in a foreign currency. 

• Additional Costs include gateway fees, switching fees, fraud-related chargeback fees, and other fees payable to third-party providers. 

It’s important to distinguish between merchant service fees and merchant account fees. 

Merchant Service Fees are the fees charged on each transaction processed through your account. These are what most people commonly refer to as ‘merchant fees’. 

Merchant Account Fees, on the other hand, are typically monthly or annual charges for maintaining your merchant/payment account, which is a specialised type of bank account necessary to ensure your business can accept card payments. The financial institution you bank with normally charges these fees. Some examples of merchant account fees include: 

• Setup Fee: once-off flat fee to establish the account. 

• Monthly Account Maintenance Fee: fixed ongoing fee (e.g. $10–$30 per month). 

• Minimum Monthly Service Fee: if your total fees don’t reach a certain level, you may be billed the difference. 

• Terminal Rental Fee: if you lease EFTPOS/point-of-sale machines. 

However, not all accounts come with these traditional costs. With the Tyro Transaction Account, you’ll pay no account setup fees, no monthly account-keeping fees, and no minimum balance requirements, and still enjoy same-day settlement for your takings. It’s a smarter way for Australian businesses to manage their money and keep more of what they earn. 

Merchant fees can vary widely depending on several factors: 

• Provider: Different financial institutions and payment service providers have varying pricing plans and fee structures. 

• Payment Method: Fees differ between card payments, such as debit card transactions, credit card payments, and contactless payments. 

• Card Type: Fees often vary between Visa debit, Visa credit, Mastercard® credit, American Express companion cards, and others. 

• Transaction Volume and Value: Higher transaction volumes or values can sometimes qualify businesses for lower average fees. 

• Business Category: Merchant category codes assigned based on the type of business can influence fee rates. 

Surcharging is when a business passes on the costs of accepting card payments to customers by adding an extra fee on top of the purchase price. It is important to understand EFTPOS surcharging because implementing it effectively is crucial for your business. In Australia, this practice is regulated to ensure that surcharges accurately reflect the actual cost of acceptance and are not excessive or misleading. 

The Reserve Bank of Australia (RBA) sets out compliance rules governing surcharging and the cost of acceptance. As of November 2025, these rules include: 

• Merchants may apply a payment surcharge only up to the actual cost they incur to process that particular payment method (cost-based surcharge). For example, if it costs a business 1% to process a credit card payment, the surcharge for that transaction cannot exceed 1%. 

• Any surcharge must be clearly disclosed to customers before payment to ensure transparency. For instance, a café displaying a sign at the counter stating, “A 1.5% surcharge applies to all credit card payments” meets this requirement. 

• Businesses can apply different surcharge rates across different schemes (eg Visa vs American Express) and also across different card types (eg standard vs premium). 

• If a business applies the same surcharge across different card types, the surcharge must not exceed the lowest cost of acceptance among those payment methods. For example, if the cost of acceptance is 1% for Visa debit and 1.5% for Mastercard® credit, the business can charge a maximum flat surcharge of 1% across both card types. 

• Surcharges cannot be excessive or misleading and must comply with the RBA’s regulations to protect consumers and ensure fair pricing. For example, charging a 5% fee on a $10 coffee when the actual cost of acceptance is 1% would be considered an excessive surcharge and non-compliant. 

By following these rules, Australian businesses can recover fees associated with accepting payments while maintaining fair and transparent pricing for customers. 

When businesses accept card payments, there are different ways to manage the costs. Tyro offers tools that help you both reduce fees and apply compliant surcharges automatically. 

Tyro Dynamic Surcharging ^{^} automatically calculates and applies the surcharge based on the type of card used by the customer. This speeds up transactions, removes manual calculations, and ensures compliance. 

Least-cost routing, like Tyro Tap & Save ^*, automatically directs eligible transactions through networks that provide the lowest average cost, such as by routing a tap via EFTPOS instead of Visa or Mastercard®. This may help businesses reduce fees ^§ without passing on extra costs to customers. 

Then there are other methods that are slightly different. 

Standard surcharging involves applying a fixed or uniform surcharge fee to customers regardless of the specific payment method or transaction type. This means the same surcharge is charged across all applicable card payments, without adjusting for the actual cost of processing different payment methods. 

Merchant fees can include several types of charges that businesses should be aware of when budgeting for payment processing. Understanding all these components helps businesses accurately calculate their total transaction costs and avoid surprises in their payment processing expenses. These typically consist of: 

• Set-up Fees: Some providers charge a one-time fee to establish your merchant account or set up payment terminals. 

• Transaction Charges: These are fees applied per transaction and usually include a percentage of the transaction value plus a fixed amount. For example, a business might pay 1.5% of the transaction value plus $0.20 per transaction. These charges vary depending on the payment method, such as debit card transactions or credit card payments, and the card type. 

• Terminal Fees: If you lease or rent EFTPOS terminals, there may be ongoing monthly or annual terminal fees for rental, maintenance, or software updates. 

You may have heard the term ‘Cost of Acceptance’, but if not, it refers to the total cost a business pays to accept a customer’s payment. In simple terms, it’s what it costs you as a merchant to process a transaction, which can vary depending on the card type, payment method, and provider. 

Knowing your cost of acceptance is essential for setting surcharges and managing expenses. Since it can be difficult to track every cost, Tyro provides a Cost of Acceptance calculator to make this easier, you can find this within the Tyro Portal. By understanding these costs, your business can ensure surcharges recover the true cost of processing payments. This keeps you compliant with Australian regulations and helps maintain transparency and trust with customers. 

Reducing merchant fees can significantly improve your business’s profitability. To help, we’ve outlined some of the most effective ways to reduce card transaction fees, including: 

• Negotiating with Providers: Don’t hesitate to discuss your fee structure with your payment service providers. Businesses with higher transaction volumes or loyal relationships often have room to negotiate lower merchant service fees, terminal rental costs, or monthly fees. 

• Encouraging Debit Card Payments and Accepting Cash: Debit card transactions generally incur lower fees compared to credit card surcharges. By promoting debit card usage and cash payments, businesses can reduce their reliance on credit card payments that incur higher fees. Accepting cash provides customers with a surcharge-free payment option and helps businesses lower overall card processing costs. 

• Utilising Least-Cost Routing: Features like Tyro Tap & Save ^§ automatically route eligible transactions through the most cost-effective card scheme network, which minimises transaction costs without affecting customer convenience. 

Modern payment solutions offer analytics and reporting tools that provide insights into your transaction volumes, fee breakdowns, and payment method trends. By regularly reviewing these reports, you can identify opportunities to adjust your payment options or negotiate better rates, ensuring you keep merchant fees under control. 

Selecting the right payment provider is crucial to managing your merchant fees effectively. Key factors to consider include transparent pricing models, reliable customer support, and seamless POS integration to ensure smooth daily operations. 

Payment providers typically offer various pricing models such as flat rate, blended, and interchange-plus. 

• A flat rate is a simple percentage per transaction, making costs predictable but sometimes higher overall. 

• Blended rates combine all cards’ fixed and variable fees into a smaller number, resulting in for example a credit rate and a debit rate. 

• Interchange-plus pricing separates interchange fees from provider service fees, offering greater transparency and potential savings for businesses with higher transaction volumes. 

Tyro offers competitive merchant service fees designed to be cost-effective for small to medium businesses. 

For example, EFTPOS Fees for the Tyro Pro are $29 machine rental plus a 1.4% transaction fee (or $0 machine rental with No Cost EFTPOS  ^¤ for merchants transacting over $10k monthly). Custom pricing is also available for businesses transacting more than $20k per month. 

Compared to traditional banks and many payment providers, Tyro provides more transparent and flexible fee structures. We avoid hidden fees and offer tools that help businesses reduce costs, such as automatic routing to the lowest average cost network. Our approach helps businesses save money and manage merchant fees more effectively. 

Merchant fees directly affect your business’s cash flow and profitability. High fees can eat into margins, while unpredictable charges make financial planning more complex. With Tyro, you can take control of your merchant costs using features such as Tyro Dynamic Surcharging  ^{^} and Tyro Tap & Save ^§. By using tools like these, along with transparent fee structures, businesses can improve cash flow, build trust with customers, and budget more effectively for long-term growth. 

Accurately calculating merchant fees is essential for making informed decisions about pricing and payment options. Tyro provides detailed Cost of Acceptance reporting, giving you clear insights into how much each payment type really costs your business. This data allows you to see the impact of card type, transaction volume, and network choice, so you can decide whether to absorb fees, pass them on, or adjust your pricing strategy. With Tyro’s reporting tools, you can easily identify opportunities to reduce costs and manage fees more efficiently. 

Incorporating merchant fees into your product pricing is a useful way to offset these costs without directly charging customers extra at the point of sale. This approach helps maintain straightforward pricing while protecting your profit margins. 

Example: Suppose your business pays a 1.5% merchant fee on credit card transactions. If you sell a product for $100, the fee is $1.50. To cover this, you could raise your price to $101.50. However, because the fee is applied to the higher amount, the actual fee becomes $1.52, leaving you with $99.98, and slightly short of your $100 target. 

To recover the full amount, you can use a simple formula:  

Price = Target ÷ (1 – fee rate) 

Recommended image: styled box showing the calculation 

Applying this to the example:  

$100 ÷ (1 – 0.015) = $101.52 

Recommended image: styled box showing the calculation 

So, by setting the price at $101.52, the 1.5% merchant fee is exactly covered, and you still net your intended $100. 

Managing merchant fees effectively is crucial for maintaining profitability and compliance. However, many businesses fall into common traps that can increase costs or create customer dissatisfaction. Here are six key pitfalls to avoid: 

• Lack of Understanding of Fee Components: Not fully grasping the breakdown of merchant fees, including interchange fees, service fees, and chargeback fees, can lead to unexpected expenses and missed opportunities to reduce costs. 

• Overlooking Hidden Fees: Additional charges such as gateway fees, terminal rental, or fraud-related fees are often overlooked, causing businesses to underestimate their true transaction costs. 

• Exceeding Cost-Based Surcharges: Applying surcharges above the actual cost of acceptance risks regulatory non-compliance and can damage customer trust. 

• Insufficient Disclosure of Surcharges: Failing to clearly communicate surcharges to customers before payment can lead to dissatisfaction and complaints. 

• Neglecting to Encourage Lower-Cost Payment Methods: Not promoting debit card payments or cash as alternatives may result in higher overall fees. 

• Missing Opportunities to Negotiate Fees and Use Technology: Businesses often miss out on negotiating better rates with providers or leveraging new technology to reduce fees. 

By being aware of these pitfalls and taking proactive steps, businesses can better manage merchant fees, improve cash flow, and maintain positive customer relationships. 

 In Australia, GST generally applies to merchant fees charged by payment service providers. This means that most fees associated with processing card payments will include a 10% GST component, which should be clearly itemised on your merchant statements or invoices. 

GST typically applies to a range of merchant-related fees, including: 

• Merchant Service Fees: Charges for processing card transactions, including percentage-based and fixed transaction fees. 

• Account Fees: Monthly or annual fees for maintaining your merchant account. 

• Terminal Costs: Rental, lease, or purchase fees for EFTPOS terminals and related hardware. 

• Other Costs: Additional fees such as gateway fees or service charges from payment facilitators. 

It’s important to review your statements carefully to identify which fees include GST. 

If your business is registered for GST, you can usually claim GST credits on the GST portion of merchant fees as input tax credits in your Business Activity Statement (BAS). This helps reduce the net cost of accepting card payments. To claim these credits, ensure you keep accurate records and valid tax invoices from your payment providers reflecting the GST charged. 

By understanding how GST applies to merchant fees and claiming eligible credits, businesses can better manage their cash flow and reduce overall payment processing costs. 

The payments landscape is rapidly evolving, with contactless, mobile wallets, and digital payment methods becoming the new standard. While these options enhance customer convenience, they add complexity to managing merchant fees, as different networks and card types have varying costs. 

Technology plays a key role in this shift, and new tools help businesses reduce costs, stay compliant, and automate fee management. By using smarter payment solutions, merchants can protect margins, maintain transparency, and stay ahead of the changes. 

BNPL typically charge around 3–7% per transaction ^*, which is significantly higher than debit or credit card fees. While more expensive, many businesses still find BNPL worthwhile for its ability to boost sales and attract new customers. The table below compares typical costs across debit, credit, and BNPL payments.

Note: The BNPL fees shown here are industry averages for third-party BNPL providers and are provided for comparison only. Tyro does not currently offer a BNPL product. 

Today’s customers prioritise speed, convenience, and flexibility. For businesses, this means surcharging strategies must carefully balance costs with customer experience. 

Ultimately, the future of merchant fees isn’t just about reducing costs; it’s about building transparency, trust, and flexibility into every transaction. Now is the time for your business to review your payment strategy, explore smarter payment solutions, and ensure your set up to thrive in a fast-changing payments landscape. 

Ready to take control of your payments? Get started with Tyro today.