Much-despised credit and debit card surcharges will be banned from October.
The Reserve Bank’s 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.
Governor Michele Bullock said the changes ‘will make card payments simpler for consumers and help businesses get better value from their payment services’.
‘Surcharging no longer works as intended,’ she said.
‘Consumers and businesses find the rules complex and confusing. Surcharges are often not well disclosed, and most consumers want surcharging to stop.’
The long-awaited ban on surcharges will come into effect on October 1 and is forecast by the RBA to save shoppers an eye-watering $1.6billion each year.
The cost of processing payments will now be baked into the advertised price rather than added as a surcharge, which the RBA said was preferred by consumers.
Business groups panned the suggestion and said it would simply drive up prices and reduce transparency.
Credit and debit card surcharges will be banned from October 1 (stock image)
But the central bank on Tuesday said extensive public consultation had not dissuaded officials from making the move.
‘Consumers are estimated to be paying $1.6billion of a total $1.8billion 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.’
The RBA will also lower the caps on interchange fees paid by Australian businesses, saving consumers about $1.2billion.
The fee is paid by a business to a customer’s card issuer when a transaction occurs.
Lowering the cap on interchange fees by businesses is predicted to benefit small businesses the most, because they often pay higher fees.
Merchants are expected to save $910million a year on card payments costs, of which $660million is earned by Australian banks.
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Will banning card surcharges lead to fairer prices for shoppers or just sneakier costs from businesses?
Reserve Bank governor Michele Bullock (pictured) said the changes ‘will make card payments simpler for consumers and help businesses get better value from their payment services’
An additional fee may still apply for Aussies who pay with American Express.
The RBA estimates 16 per cent of businesses impose a surcharge when customers use a debit or credit card, which equates to a third in the hospitality sector.
However, everyday Aussies could be slugged with higher credit card fees as banks try to maintain their reward schemes.
A survey of 3,000 people conducted by the RBA found that three‑quarters of respondents wanted surcharges scrapped.
