Businesses would be banned from applying surcharges to all credit and debit card transactions from July next year under a Reserve Bank proposal that could save Australian consumers close to $1.2 billion a year.
Surcharges for credit and debit card transactions could soon be a thing of the past.Credit: Dominic Lorrimer
On Tuesday, the RBA released its review into card surcharges, proposing a suite of reforms aimed at lowering fees for both consumers and merchants, including a lever to force credit card companies and financial players – involved higher up the payments chain – to publish details of the fees they impose on businesses.
The RBA’s proposal to stop fees on credit and debit card transactions, which will now be subject to an industry consultation window, goes further than reforms the Albanese government had flagged last year, when it said it wanted to ban surcharges on debit cards.
For years, businesses have been able to apply surcharges to credit and debit card payments, but the amount is not supposed to exceed what it costs a business to process the payment. While average surcharges have been about 0.7 per cent of a transaction, they have ranged between 0.1 per cent to 10 per cent.
In its preliminary view, the RBA has proposed banning all surcharges for consumers using Eftpos, Visa and Mastercard – applying its rules to American Express would rely on separate reforms to the payments act currently on the horizon – noting “surcharging is no longer achieving its intended purpose of steering consumers to make more efficient payment choices”.
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“Avoiding surcharges has become harder as cash usage has declined. Businesses are increasingly charging the same surcharge rate across debit and credit cards and there are significant challenges,” the RBA said.
The RBA took the decision to include credit cards in the surcharge ban after feedback from its initial issues paper released in October, where payment service providers estimated the cost of banning surcharges for just debit cards would be more costly, take more time and would be more confusing to implement than a blanket ban.
In extending credit cards in the surcharge ban proposal, the RBA has also announced lower fees and greater transparency measures for businesses. These include lowering the cap on interchange fees that businesses have to pay payment service providers (including fintechs such as Square), as well as banks that provide terminal technology.
