The federal government is cracking down on unfair and excessive card surcharges to get a better deal for Australians and small businesses at the physical and online checkout.
This week the government announced $2.1 million of new funding for the ACCC to tackle excessive surcharges, with further work underway to reduce payment fees.
It is also prepared to ban debit card surcharges from 1 January 2026, subject to further work by the Reserve Bank of Australia (RBA) and safeguards to ensure both small businesses and consumers can benefit from lower costs.
Treasurer Jim Chalmers says the announcements are all about getting a better deal for consumers, reducing costs for small businesses and promoting a more competitive payments system
“Consumers shouldn’t be punished for using cards or digital payments, and at the same time, small businesses shouldn’t have to pay hefty fees just to get paid themselves,” he said.
“We’re prepared to ban debit card surcharges, subject to further work by the Reserve Bank and safeguards to ensure small businesses and consumers can both benefit from lower costs.”
RBA review
The RBA is responsible for regulating the payments system and is undertaking a Review of merchant card payment costs and surcharging, with its first consultation paper released on Tuesday.
The RBA says Australians extensively use cards to pay for goods and services, and they benefit from the convenience and security provided by card payments.
“However, in an environment of heightened concern around the cost of living, card payment costs and surcharging are attracting more attention from merchants and consumers,” the RBA said in a statement.
“These issues are linked, since merchants would be less likely to surcharge consumers if card payment costs were lower. It is timely, therefore, to review whether regulatory settings could be adjusted to put further downward pressure on merchant card payment costs and whether the RBA’s surcharging framework remains fit for purpose.”
Stakeholders can provide written submissions to RBA’s Review into Retail Payments Regulation by 3 December 2024.
Hidden costs
Dr Angel Zhong, Associate Professor of Finance at RMIT says the proposed surcharge ban would be beneficial to consumers, especially as they continue to face cost of living pressures.
“Excessive debit card surcharges undermine consumer trust and place undue financial strain on small businesses, which are the backbone of the Australian economy,” she said, noting that excessive surcharges have already been banned in the UK and parts of Europe.
She also warns that some businesses may also find ways to bypass the rules by introducing other fees, such as service costs or higher holiday/weekend surcharges.
“The ACCC needs to monitor and address these practices as well,” Dr Zhong said.
The warning is echoed by Jason Bryce, founder of the campaign to “protect our right to choose how we pay”, Cash Welcome. He says the proposal will not ban card fees but simply hide them in the cost of goods and services, raising prices for everyone and squeezing small businesses.
“A ban on card surcharging effectively means that costs are absorbed into all retail prices and paid for by all consumers, including people who pay with cash,” he said.
Card surcharging at the retail point of sale provides consumers with clear, up-front information about the cost of their payment, says Mr Bryce. “They can choose which payment method to use – credit, debit, eftpos, cash, BNPL or other method, based on the surcharge information.
“All retail payments in Australia must be surcharge-free for cash and surcharged at a cost-recovery rate for all cashless payment methods,” he said.
Ben Zyl, co-founder and CEO of Waave says payment costs are about to hit Australian merchants like a freight train.
“The clock is ticking for merchants to review what payments they offer and how much it’s costing them,” he said.
“Until now merchants have based their payments on consumer choice. However, cost is about to become the new battleground for payments, and the turning point in our payments innovation curve.”
