The Reserve Bank wants card surcharges to be scrapped

Australia’s central bank has recommended businesses get rid of extra charges on payments made by debit and credit cards.

The Reserve Bank of Australia (RBA) estimates customers lose $1.2 billion each year to these surcharges.

It has opened up a consultation over the next six weeks to consider whether there needs to be an overhaul to the payment system as cash usage continues to decline.

Surcharges

Surcharges are additional fees applied to a transaction. In Australia, businesses will charge 1-2% in extra fees depending on the card used.

For example, if a product is $20, a card surcharge may increase the final price to $20.25. This is the cost that payment facilitators, like Mastercard, charge businesses to use their service. Direct debit is usually cheaper than credit cards.

Larger companies apply lower card surcharges, according to RBA analysis, because they are charged less by banks.

Costs

RBA figures show consumers pay $1.2 billion a year in Australia on card surcharges — around $60 per “card-using adult”.

There are federal laws limiting how much a business can charge a customer for using credit cards. Under the law, businesses shouldn’t charge more than what it costs to process and accept a card.

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Australia’s consumer watchdog can enforce penalties on businesses that apply “excessive” or “misleading” surcharges.

Proposal

The RBA has suggested businesses should get rid of card surcharges, following a review that has been underway since October 2024.

“Surcharging is no longer achieving its intended purpose of steering consumers to make more efficient payment choices,” the RBA said in a statement.

The central bank attributes this to an overall decline in cash transactions.

It added there have been “challenges” in enforcing fair surcharge rules.

What now?

The RBA said federal legislation would be needed to introduce an enforceable ban on card surcharges.

It also suggested broader changes in the way that companies including Visa and Mastercard charge businesses when processing their payments, which it said would reduce costs to businesses.

The Government and Opposition are yet to directly respond to the RBA’s proposal. The RBA-led review will accept consultations until 26 August.