Huge change to payments proposed in Australia: What it means for you

Australia’s central bank wants to ban surcharge fees on both debit and credit cards in a move expected to save consumers more than $1billion a year as fewer people use cash.

The Reserve Bank of Australia’s review of merchant card payment costs recommends the fees be scrapped on EFTPOS, Mastercard and Visa card transactions as they don’t help consumers make more efficient payment choices.

Lowering the cap on interchange fees paid by businesses would also save Australians $1.2billion, it said in a consultation paper published on Tuesday.

An interchange fee is paid by a business to a customer’s card issuer when a transaction occurs.

The RBA’s proposals go further than what the federal government has previously suggested, with just 13 per cent of in-person transactions now done in cash.

‘A full removal of surcharges on all designated card networks would reduce broader economic inefficiencies associated with consumers finding it difficult to avoid a surcharge, inadequate merchant disclosure, drip pricing involving added card payment surcharges and the complexity of surcharging rules,’ it said.

Treasurer Jim Chalmers last year said the government was prepared to ban fees on debit card transactions from the start of 2026, but the RBA wants to also ban fees on credit card transactions.

Consumers are estimated to pay $1.2billion in surcharges on payments each year, the equivalent of $60 per card-using adult.

‘Lower interchange fees would reduce the need for merchants to raise their consumer prices to compensate for no longer being able to surcharge,’ the RBA said.

Scrapping surcharges would also mean consumers would not need to switch between payment methods to try to avoid a fee.

Small businesses typically pay higher card fees, and many of them prefer accepting cash.

‘Given that higher interchange fees are largely paid by smaller merchants, the benefits of lowering interchange caps would be most pronounced for smaller merchants,’ the RBA paper said.

‘The reductions in domestic interchange caps could generate interchange savings of around $550 million per year for smaller merchants.’

RBA Governor Michele Bullock said both consumers and businesses would benefit from the proposal as fewer Australians make cash payments.

Customers would avoid paying surcharges, while businesses would no longer be forced to face the high costs associated with accepting card payments.

‘We think the time has come to address some of these high costs and inefficiencies in the system,’ she said.

‘The payments landscape is always evolving, and it’s critically important that we keep pace to ensure it remains safe, competitive and efficient.’

The RBA proposed removing its own prohibition 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 federal government introduce legislation to ban surcharge fees.

Lowering the cap on interchange fees for businesses is predicted to benefit small businesses the most, because they often pay higher fees.

The central bank found small businesses would be $185million better off under the changes, with 90 per cent of them benefiting.

Better transparency achieved by forcing card networks and large acquirers to publish the fees they charge has also been recommended, to foster greater competition between the networks.

Ms Bullock predicted the proposals would spark much discussion particularly among businesses that do surcharge, prompting a six-week consultation period on the plan.

Any changes won’t kick in until July 2026.

A Reserve Bank consultation paper published on Tuesday said the federal government would have to legislate to ban card fees because merchants aren’t covered by the Payments Systems (Regulation) Act 1998.

The RBA is taking submissions until August 26.