Removing surcharges fees on debit and credit card transactions could save consumers more than $1 billion, but small businesses argue the changes will just hide the costs in increased prices.
The Reserve Bank of Australia’s review of merchant card payment costs recommends the fees be scrapped on EFTPOS, Mastercard and Visa card transactions because they don’t help consumers make more efficient payment choices.
Consumers are estimated to pay $1.2 billion in surcharges on payments each year, the equivalent of $60 per card-using adult.
Lowering the cap on interchange fees paid by businesses – another recommendation – would save Australians $1.2 billion.
The fee is paid by a business to a customer’s card issuer when a transaction occurs.
But the Australian Restaurant and Cafe Association slapped down the proposal, and suggested the “tone deaf” policy would simply drive up menu prices.
“Who the hell does the RBA think will bear the cost of this ridiculous decision?” chief executive Wes Lambert said.
“A blanket ban on surcharging will undermine small businesses, reduce price transparency and mandate price hikes across every menu in Australia.”
The Council of Small Business Organisations Australia said businesses would just raise their prices and the changes would hide, rather than remove, surcharges.
The Independents Payment Forum – a body that represents small businesses including retailers, cafes, service stations and convenience stores – said other merchant fees would still eat into profit margins.
“The proposed regulatory options fail small businesses and the local communities they serve,” co-founder Bradford Kelly said.
“They benefit big business, big banks and big offshore companies.”
The RBA’s proposals go further than previous federal government suggestions and are likely to be pushed through by the central bank, pending the outcome of a short feedback window.
Treasurer Jim Chalmers had said the government was prepared to ban fees on debit card transactions from the start of 2026.
But the RBA has included credit cards.
The government will consider the recommendation, but Dr Chalmers on Tuesday noted the RBA expected to be able to make the changes under its existing powers.
The central bank proposed removing prohibitions on “no surcharge” rules to achieve scrapping the fees.
It expected the card networks would then follow by implementing “no surcharge” rules based on historical experience and arrangements in other jurisdictions.
If that did not occur, the RBA would recommend the government legislate to ban surcharge fees.
Canstar data insights director Sally Tindall said consumers were fed up with being slugged with extra fees at the checkout.
“Our research shows the vast majority of Australians want this annoying bugbear off their backs for good,” she said.
Banks and other payment systems backed the changes because they kept pace with the reality of the modern-day transaction.
“It makes sense that consumers know the final price before they get to the checkout,” an Australian Banking Association spokesperson said.
“Banks will work with the government to provide Australians with more certainty and transparency on the costs of digital payments.”
RBA governor Michele Bullock said consumers and businesses would benefit as fewer and fewer Australians made cash payments.
“The time has come to address some of these high costs and inefficiencies in the system,” she said.
Lowering the cap on interchange fees by businesses is predicted to benefit small businesses the most, because they often pay higher fees.
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.
Any changes won’t kick in until July 2026.
