Surcharge fees on debit and credit card transactions will be ditched, despite strong opposition from businesses.
The Reserve Bank of Australia’s (RBA) review of merchant card payment costs recommended the fees be scrapped on EFTPOS, Mastercard and Visa transactions because they don’t help consumers make more efficient payment choices and cost shoppers about $1.6 billion a year.
Business groups panned the suggestion and said it would simply drive up prices and reduce transparency.
But, the central bank explained extensive public consultation had not dissuaded officials from making the move.
“Consumers are estimated to be paying $1.6 billion of a total $1.8 billion in card payment surcharges charged each year on designated card networks,” the RBA said.
“The surcharging framework, introduced more than two decades ago, is no longer achieving its intended purpose of steering consumers towards making more efficient payment choices.
“The increased prevalence of businesses surcharging all cards at the same rate, challenges with enforcing the current surcharging framework, and consumers using less cash have reduced the effectiveness of the surcharging regime.”
Consumers would prefer payment costs be incorporated into advertised prices, the RBA added.
The central bank will also lower the caps on interchange fees paid by Australian businesses, saving consumers about $1.2 billion.
The fee is paid by a business to a customer’s card issuer when a transaction occurs.
Treasurer Jim Chalmers previously flagged the government was prepared to ban fees on debit transactions before the RBA recommended extending that measure to credit as well.
He noted the Reserve Bank would be able to make all the changes under existing powers and would not need legislation to be passed.
Lowering the cap on interchange fees by businesses is predicted to benefit small businesses the most, because they often pay higher fees.
When releasing the recommendations in July 2025, the central bank found small businesses would be $185 million better off under the changes, with 90 per cent of them benefiting.
Better transparency achieved by forcing card networks and large acquirers to publish what fees they are charging has also been recommended to foster competition between networks.
The surcharge removal will kick in from 1 October.
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