The Australian government has announced that debit and credit card surcharges will be banned by October, following reforms by the Reserve Bank of Australia (RBA). Treasurer Jim Chalmers stated the changes aim to ease cost-of-living pressures, noting that 'Australians hate paying these charges.'
The new rules, unveiled on Tuesday, will allow businesses to remove added fees on Mastercard, Visa, and eftpos payments. Currently, about 16% of businesses impose surcharges, costing consumers an estimated A$1.6 billion annually. The RBA will also lower the cap on fees that issuers, such as banks, can charge businesses, saving businesses around A$910 million a year.
While the reforms eliminate surcharges, payment schemes will still incur costs, and businesses may need to raise shelf or menu prices by an estimated one-off 0.1% to compensate. The Australian Hotels Association criticised the move, with chief executive Stephen Ferguson arguing it would not make typical purchases like coffee or beer cheaper.
Consumer surveys conducted for the RBA's review found that most Australians prefer knowing the final price upfront, even if higher, rather than facing hidden fees. Three in four respondents believed surcharging should stop. Banks, however, argued that surcharges cover the costs of the payments system, including credit card rewards.
The RBA acknowledged that banks would lose revenue from these changes, potentially leading to higher credit card fees and interest rates, as well as reduced rewards. Smaller payment providers like Square and Tyro welcomed the increased transparency, with Tyro CEO Nigel Lee saying it would help businesses choose providers more easily.
