Today, EFTPOS (Electronic Funds Transfer at Point of Sale) has become an integral part of our daily lives. EFTPOS machines, or card terminals, enable businesses to accept card payments, including debit cards, credit cards, and contactless payments. These devices play a crucial role in facilitating electronic payments, thus reducing the need for cash handling and streamlining transactions.
When using an EFTPOS system, businesses often implement surcharge strategies to cover the costs associated with processing card payments. These strategies can vary, with two common approaches being fixed fees and percentage surcharges. Understanding these strategies can help consumers make informed choices about where to shop and pay for their purchases.
Fixed Fees: A Simple Approach
With a fixed fee surcharge, businesses charge a flat rate for every transaction made using an EFTPOS terminal. This means that no matter the size of the purchase, you’ll pay the same amount in fees. For example, a business might charge a fixed fee of USD$0.20 per transaction.
Advantages of Fixed Fees
With a fixed fee surcharge, customers know exactly what they’ll pay. This is a big advantage, especially for those who want to budget their spending. There’s no surprise fee that might pop up at the end of the transaction.
For businesses, fixed fees are simple to manage. They don’t need to calculate a percentage for each transaction. This can save time and effort.
Fixed fees can also be helpful for small businesses. They don’t have to worry about losing money on small transactions because the fee is the same regardless of the purchase amount.
Disadvantages of Fixed Fees
Fixed fees, while simple, can have drawbacks for both businesses and customers. For instance, small businesses might find that fixed fees can eat into their profits, especially for low-value transactions. This is because the same fee is charged regardless of the purchase amount.
For example, a small coffee shop might charge a fixed fee of USD$0.20 per transaction. If a customer buys a USD$2 coffee, the fee represents 10% of the total cost. However, if the customer buys a USD$20 meal, the fee becomes a less significant portion of the overall price.
From a customer’s perspective, fixed fees can feel unfair for small purchases. For example, a customer might feel that paying a USD$0.20 fee for a USD$1 candy bar is excessive. This can lead to customer dissatisfaction and potentially drive them to seek out businesses with lower or no fees.
Percentage Surcharges: A Proportional Approach
A percentage surcharge is a fee that’s calculated as a percentage of the total purchase amount. This means that the fee will increase or decrease based on the size of the transaction. For example, a business might charge a percentage surcharge of 1.5% on all EFTPOS transactions.
Advantages of Percentage Surcharges
Percentage surcharges are often seen as fairer than fixed fees, especially for larger purchases. For example, imagine paying a flat fee of USD$0.50 for a USD$10 purchase and then paying the same fee for a USD$100 purchase. It might feel like you’re paying a disproportionate amount for the smaller item. With a percentage surcharge, the fee increases with the purchase amount, making it feel more balanced.
Businesses can earn more revenue from larger transactions with percentage surcharges. This is because the fee increases as the purchase amount grows, leading to higher profits. For example, a 2% surcharge on a USD$100 purchase would be USD$2, while a 2% surcharge on a USD$1,000 purchase would be USD$20.
Disadvantages of Percentage Surcharges
Percentage surcharges, while often seen as fairer, can also have drawbacks. For example, customers may find it challenging to estimate the exact fee for a purchase, especially for larger or more expensive items. This uncertainty can lead to confusion and potentially discourage customers from making purchases.
Moreover, while percentage surcharges can be beneficial for businesses with high-value transactions, they can also be disproportionate for smaller purchases. In these cases, customers may feel that the fee is excessive, potentially leading to dissatisfaction and lost business.
Factors to Consider When Choosing a Surcharge Strategy
When deciding between a fixed fee and a percentage surcharge, businesses should consider the following factors:
- Average transaction size: Businesses with higher average transaction sizes might benefit from percentage surcharges.
- Customer preferences: Some customers may prefer fixed fees for their predictability, while others may find percentage surcharges more fair.
- Competitive landscape: Businesses should consider the surcharge strategies of their competitors to avoid losing customers.
Hybrid Surcharge Strategies
Some businesses may choose to implement a hybrid surcharge strategy, combining fixed fees and percentage surcharges. For example, they might charge a fixed fee for small purchases and a percentage surcharge for larger transactions. This can help to balance the advantages and disadvantages of both approaches.
Surcharge Regulations and Consumer Protection
It’s important for businesses to comply with local regulations regarding surcharges. Many jurisdictions have laws that limit the amount of fees that can be charged to customers. Additionally, businesses should be transparent about their surcharge policies and provide clear information to customers.
Final Thoughts
Understanding surcharge strategies is essential for both businesses and consumers. By weighing the pros and cons of fixed fees and percentage surcharges, you can make informed decisions. So, the next time you pay with your card, take a moment to consider the surcharge and how it might affect your purchase.
Jason is the Marketing Manager at a local advertising company in Australia. He moved to Australia 10 years back for his passion for advertising. Jason recently joined BFA as a volunteer writer and contributes by sharing his valuable experience and knowledge.
Leave a Reply