Calculating a Weighted Surcharge Rate

The costs associated with processing contactless debit transactions are lower compared to credit transactions. While you can set different surcharge rates for various schemes or cards to account for varying acceptance costs, your terminal cannot differentiate between contact and contactless transactions. This means you cannot have separate rates for Visa credit cards and Visa contactless debit cards. A weighted average surcharge rate helps you strike the right balance.

Step-by-Step Guide to Calculating a Weighted Average Surcharge Rate

Let's walk through the process using an example for a small business owner named Harry.

Step 1: Identify Your Cost of Acceptance

For each transaction, Harry incurs the following costs:

• 0.7% of the transaction amount for processing contactless debit transactions
• 1.5% of the transaction amount for processing Mastercard and Visa contact and contactless credit transactions

Step 2: Determine the Share of Costs for Each Payment Method

Harry analyses his transactions over the past 24 months and finds the following:

• 40% of his purchases are contactless debit transactions
• 20% of his purchases are Mastercard and Visa credit contact and contactless transactions
• The remaining 40% of transactions are made with cash or an EFTPOS/debit card where the card is swiped or inserted. These transactions are not eligible for surcharging.

Of Harry's transactions eligible for surcharging (60%), contactless debit makes up 66.7% (40/60), and credit transactions make up 33.3% (20/60).

Step 3: Calculate the Weighted Average Surcharge Rate

Harry now multiplies his cost of acceptance by the relevant % share for each payment method:

• Contactless Debit: 0.7% × 66.7% = 0.467%
• Credit: 1.5% × 33.3% = 0.5%

Finally, add these together to find the weighted average surcharge:

0.467% + 0.5% = 0.967%

Harry should apply a surcharge of 0.967% to all purchases eligible for a surcharge.