Local businesses breaking the law by charging extra for card transactions

Lucas Shongwe, Rodney Hlatshwayo and Nelisiwe Skhosana

Nkangala — Consumers across Nkangala and South Africa at large find themselves having to pay more than the prices displayed on shelves. This is because some retailers quietly impose additional fees — known as surcharges — on customers who pay by card or request cashback.

The practice has become increasingly common in local tuck shops and small businesses, raising concerns over fairness and legality in a community where cashless payments are becoming the norm. As the world moves rapidly towards a digital economy, fewer people are opting to carry cash, choosing instead the safety and convenience of debit and credit cards for their daily purchases. However, many consumers say they are losing money to hidden costs every time they swipe.

Samukelo Masondo, a resident of Victor Khanye Local Municipality, said he faces small but frequent charges that quickly add up. “When we shop at the Indian tuck shops they often charge us an extra R2 or sometimes even R5,” he said. “While it may seem negligible, it really adds up, particularly when purchasing essentials,” he said.

It is not just the tuck shops that pay for transaction fees, customers also have to pay. “Ultimately, we end up losing money from both the shop and the bank. It’s incredibly frustrating, especially for those of us already grappling with financial challenges,” said Masondo’s brother, Lungani.

While some customers feel short-changed, others believe the fees are comparable to regular bank charges. Thandabathu Mahlangu, a resident from Tweefontein in the Thembisile Hani Local Municipality, offered a different perspective. She usually buys in a local spaza shop Jerusalema General Dealer.

“I’m not claiming to be okay with the additional fees, but honestly, they’re pretty comparable to what our current bank charges. For instance, when I use my bank for a cash send, they hit me with around R8 in fees. Honestly, I think Bhobhojan’s charges are quite fair,” she added.

Bhobhojan is the owner of Jerusalema General Dealer.

On the other side of the counter, retailers say they are also trying to cover their own costs. Bhobhojan explained how his fees work. For cashback between R50 and R150, there’s a fee of R10 and for amounts from R160 to R200, the fee is R20. To be clear, this is far more than what a bank charges for withdrawal or online transactions. For example, one of the bank’s charges cost R10 for every R1,000 withdrawn.

The maximum cashback amount available is R200 and he typically adds R3 for electricity purchases. This is due to a R2,50 fee incurred from using his flash machine. “So, if you’re buying R20 worth of electricity, just tack on an additional R3,” explained Bhobhojan. “And for every item you buy using a Capitec card, there’s just a R2 extra added.”

Many small retailers use card payment devices to sell airtime, data, electricity and to process card or cash back transactions. The device features a printer for immediate receipt generation, dual SIM card capability and Wi-Fi connectivity.

“The machine itself incurs costs for us, which is why we have to impose transaction fees on customers using it,” shared a staff member from Abesha tuckshop in Mhluzi, Middelburg.

A tavern owner from Rockdale, Middelburg, admitted to adding an extra R5 charge on card payments. “I often hear complaints from patrons asking why there’s an additional R5 fee. I explain that it’s the costs associated with providing this service. However, some of my regulars don’t mind because they grasp the reason behind the extra charge,” he shared.

We pretended to be an interested party in acquiring one of these machines. The sales representative that we spoke to shared insights about the straightforward 2,5% flat fee (excluding VAT) associated with transactions.

Interestingly, she noted that other activities like selling airtime, electricity and vouchers typically come with no extra fees. “Business owners receive immediate commissions on these sales, eliminating the need for additional charges to customers,” she explained.

The Payment Association of South Africa (PASA), mandated by the South African Reserve Bank (SARB) to organise, manage and regulate its members’ participation in the National Payment System (NPS), clearly states that businesses cannot impose additional charges for card transactions. Instead, it’s the responsibility of financial institutions that offer payment services to directly handle any compliance issues with merchants who fail to comply.

Major South African banks are among PASA members, which also include smaller banks and some non-banks designated into the NPS. PASA emphasises that its constitution and regulatory framework mandate acquirers— the financial institutions that provide payment services to businesses, such as shops, restaurants, or online stores— to follow its rules alongside the broader card schemes established by payment networks like Visa and MasterCard.

“If the customer has the sales slip, it should show the acquirer name and the merchant number that they will need to report the merchant to the correct acquiring bank. If the bank name is not on the sales slip it would be on the device used for swiping the card,” said the PASA communications team.

The Consumer Goods and Services Ombud (CGSO) aligned with PASA’s perspective, emphasising that retailers are not allowed to add a penalty fee on top of the displayed price when a customer chooses to pay by card. “Bring this to the attention of the supplier and request that it be corrected,” said CGSO Education and PR Manager, Ouma Ramaru.

If a complaint is lodged claiming that a surcharge was added, the CGSO will investigate to determine if Section 23 of the the Consumer Protection Act has been breached and recommends appropriate relief in the circumstances.