Your eftpos transaction fee is like a tax of every sale. For instance, you might sell $40,000 of orders in a month but only receive $39,500 in the bank. Straight away, $500 is taken in eftpos fees.
Have you ever actually tried to figure out how much you’re paying and whether it’s a good rate?
It seems as though eftpos providers make it really difficult for you to calculate exactly what you’ll have to pay in fees. Not only do they rarely publish their fees on their websites, but many have complex fee structures that require a PhD in multivariate calculus to decipher.
And even if you do figure it out, what is considered ‘cheap’ when it comes to eftpos fees? It’s not like people are openly talking about their rates.
In this article, we cut through the obscurity, clear up eftpos fee structures, and help you understand exactly how much you should be paying.
How much you should be paying in eftpos fees
Smaller businesses pay more in eftpos fees
As a general rule, the more transactions you make in a month, the lower your eftpos fees will be. This means that new and smaller businesses pay more in eftpos fees.
There are a few reasons why small businesses pay more:
- There are a number of fixed costs associated with eftpos, such as establishment fees and terminal rental fees, and smaller merchants have fewer transactions to spread these over
- Larger merchants are more likely to receive favourable pricing from banks and card networks
- The pain of switching eftpos providers might not be worth it for small merchants that have a lower number of transactions and less financial benefit from switching
Eftpos fee benchmarks you should aim for
Unless you’re willing to shop around to every eftpos provider, it can be difficult to understand what is considered a ‘cheap’ eftpos transaction fee.
To help give some indication, we analysed Reserve Bank data on the cost of card acceptance for merchants. We were able to estimate average eftpos transaction fees by business size, which we plotted in the chart below.
Although this data is consistent with real-world information we’ve received from operating businesses, it is important to understand that merchant fees are calculated based on a number of factors, including things like the type of business you run.
For example, a travel agent is considered a higher risk than a cafe, so merchant fees will be set higher. Nonetheless, the chart above should give you a decent benchmark to understand whether your eftpos fees are too high.
How to reduce your eftpos fees
Request a more competitive rate
Irrespective of whether you’re paying too much for eftpos or you already have a competitive rate, the simplest way to reduce your eftpos fees is to call your eftpos provider and request a fee reduction.
The competition for merchants is quite fierce and most providers will compete for your business. 
Move away from mobile and micro-business solutions
You may have noticed in the chart above that even the smallest businesses are paying between 1.10-1.20% in eftpos transaction fees. But new eftpos solutions — such as the Square Reader, Square Terminal, and PayPal Here — charge closer to 1.60-2.00% per transaction.
These types of solutions charge a premium for additional features. These include the ability to take payments on-the-go, fancy product designs, built-in point-of-sale software, and slick online dashboards. Unless you really need these features, you should consider switching to a cheaper solution.
Choose an eftpos provider that offers least cost routing or consider surcharging
In the chart above we showed the average merchant fees by business size. But this averaged both debit and credit transactions from various card networks, such as Eftpos, Visa, Mastercard, American Express, Diner’s Club, and more.
But the devil is in the detail, as they say. And not all transactions cost the same. The chart below shows the average fees for each card network over time.
There are a couple of interesting things to note in this chart:
- Eftpos is the cheapest card network by far. This means you want more of your transactions to be processed through the eftpos network to save yourself on merchant fees. Therefore, you should be looking for an eftpos provider that offer least-cost routing (learn more). According to Tyro, least-cost routing saves merchants an average of 8.1% on their transaction fees.
- Diner’s Club and American Express cost more than other networks. This means that every American Express or Diner’s Club transaction will cost you more in eftpos fees. To manage this, you could either stop accepting these card types or consider surcharging American Express and Diner’s Club cards.
Understanding eftpos fee structures
It’s easy enough to say something like “you should be aiming for eftpos fees below 1.00%”. But eftpos providers make it quite difficult to calculate your average merchant fees, so let’s break down these fee structures so you know exactly how much you’re paying for eftpos.
There are three main pricing structures that eftpos providers use:
- Pricing Plans
- Blended Pricing
- Cost Plus / Interchange Plus Pricing
|1. Pricing Plans||2. Blended Rates||3. Cost Plus Pricing|
|Terminal Rental Fee||No||Yes||Yes|
|Transaction Fee||No; unless you exceed your included transaction limit or want to accept rare card networks||Yes; single rate for all card types (e.g. eftpos, Visa, American Express)||Yes; calculated individually on each transaction. Merchant is charged a margin plus any fees the eftpos provider incurs|
- Single monthly fee. Eftpos providers that use pricing plans will you pay a single monthly fee for an eftpos machine and an included amount of transactions every month (e.g. pay $55 per month for an eftpos machine with $3,500 of included transactions).
- Additional fees for less common card networks. For most providers, the included transactions will cover Eftpos, Visa and Mastercard transactions only. And they will charge a fee to accept cards from less common card networks. These include American Express and Diner’s Club. This fee is typically a percentage of the value of the transaction. For example, a provider might card 1.50% for accepting American Express transactions, so on a $10 transaction, the cost will be 15c. This is charged over and above your monthly fee.
- Additional fees for excess transactions. For all transactions over your monthly plan limit, then you will also be charged a percentage of the value of the transaction. Assume that you are on a $55 plan includes $3,500 of transactions, and excess transactions are charged at 1.5%. If you actually transact $4,000, then you’ll have to pay your monthly plan fee of $55 plus $7.50 (which is $500 of excess transactions at a cost of 1.5%).
- Single transaction fee across most card types. Eftpos providers charge the same fee is charged for Eftpos, Visa and Mastercard transactions. However, often merchants will need to contact American Express and other card networks directly to accept these card types, and will therefore have separate pricing arrangements.
- Terminal fees. Merchants on a blended rate fee structure will also have to pay a monthly terminal rental fee, unless they buy the device outright. The terminal rental fee is generally about $20-40 per month and there will be a lost device fee if the merchant does not return the fee when the contract is over.
Cost-Plus / Interchange-Plus
- Variable transaction fee for each transaction. In a cost-plus pricing structure, the EFTPOS machine provider will agree to charge the merchant a percentage of the transaction value, plus any fees that they are charged from the card network or other banks. The total cost will vary based on card type (e.g. low rate vs premium cards), the card network (e.g. Eftpos vs Visa vs Mastercard), the location of the cardholder (e.g. domestic vs international) and other factors.
- Terminal fees. Just like the blended fee structure, the cost-plus structure often requires the merchant to pay a $20-40 monthly terminal rental fee per EFTPOS machine.
Other fees to watch out for
There are a number of other fees that can pop-up in any of the three pricing structures above, including:
- Establishment fees. Some eftpos providers charge a fee to establish your merchant facility, although it’s not uncommon to see promotions that waive establishment fees.
- Settlement account fees. Many banks require that you open up a transaction account to deposit your eftpos machine funds into. Unless you already have an account, it’s important to check the monthly account cost and treat it as an additional eftpos machine cost.
- Integration fees. Some providers offer the ability to integrate an eftpos machine with a merchant’s point of sale software. This means that the transaction cost is automatically sent to the eftpos machine and you do not have to key in the purchase price. You should check to see whether the provider charges a fee to setup and configure the integration. For example, Live Eftpos Black charges $99 for integration.
- MOTO / card not present fees. MOTO is short for mail order/telephone order and occurs when you type in a customer’s card number on the terminal without inserting or tapping the card itself. These transactions can take place without the customer’s physical card, so there is a higher risk of fraud. As such, providers will charge additional fees for this type of transaction. The fees for MOTO transactions range from Tyro’s additional 0.15% MOTO fee on the normal transaction cost to PayPal’s 2.90% + 30c per transaction.