RBA determines hidden debit tap and go surcharge to be removed

One of Australia’s most hated hidden fees has been scrapped, but households aren’t expected to pocket all of the $1.6bn in savings.

On Tuesday, the RBA released its long-awaited review of merchant card payment costs and surcharging.

As part of three key changes, the RBA says it is removing surcharging on debit, prepaid and credit cards across eftpos, MasterCard and Visa networks.

Instead, businesses will be required to include the entire price – including any costs to issue credit – as part of the sticker price.

Australians are slugged about $1.6bn in surcharge payments every year, while businesses pay $200m to card providers.

The RBA says the surcharge framework, introduced more than two decades ago, is no longer achieving its intended purpose of steering consumers towards making more efficient payment choices.

“When card surcharges end, the sticker price will be the price that consumers end up paying. Consumers will no longer be surprised at the checkout by an unexpected surcharge for paying by card,” the RBA said in a statement.

It says these changes are unlikely to impact cost-of-living pressures, although the RBA concedes businesses may try to recoup these surcharge payments through higher costs.

The surcharges will be removed by October 1, 2026.

Another change announced by the central bank will lower the amount that businesses pay card merchants to use their services.

Under the changes, the “interchange cap” will be dropped from 0.8 to 0.3 per cent for domestic-issued consumer credit card transactions.

The RBA estimates this will save businesses $910m, with the RBA saying it will take measures to ensure payment providers simply don’t pocket the additional savings.

Changes to businesses will also come into effect from October 1, 2026. The introduction of an interchange cap on foreign cards will start six months later on April 1, 2027.

Ms Bullock said the changes should help lower card payment costs for businesses, especially smaller businesses that are usually charged higher costs to accept payments.

“Of the 16 per cent of Australian businesses that surcharge, it will be up to them to choose whether to include payment costs in their sticker prices when surcharging ends, just as they do with other costs,” the RBA statement said.

The RBA will also increase the transparency of card payment fees by acquiring the likes of eftpos, MasterCard and Visa to publish the fees they charge, helping businesses to check and compare.

Win for businesses and consumers

Federal Treasurer Jim Chalmers welcomed the ending of surcharges, saying it will help small businesses and consumers with cost-of-living pressures.

“People shouldn’t be punished for using a credit or debit card,” Mr Chalmers said.

“Australians should be able to use debit and credit cards without being penalised, and that’s what this change will help to deliver.”

Mr Chalmers described the surcharge rules as simply hard to follow for both consumers and businesses.

“Ending credit and debit card surcharges and reducing interchange fees will ensure consumers aren’t hit with surprise costs and save consumers and businesses money,” he said.

“The Albanese government is focused on inflation, productivity and resilience and global uncertainty, at the same time as we provide responsible cost-of-living relief and the RBA’s work on payments and ending card surcharges will make a meaningful difference.”

At a press conference post RBA announcement, Mr Chalmers conceded there would be some winners and losers out of Tuesday’s announcement.

“Often when changes of this magnitude are proposed, there will be people that are supportive of it and people who oppose it,” he said.

“We expect that and no doubt the Reserve Bank will engage with stakeholders to make sure these issues

Pours fuel on the inflation fire

While Mr Chalmers welcomed the reforms, small business groups warned sticker prices will rise due to Tuesday’s announcement.

According to the Independent Payment Forum (IPF), all Australians – including those who use cash – will be slugged by Tuesday’s announcement.

IPF founder and payments expert Brad Kelly called the RBA’s decision a slap in the face for consumers, warning the price of coffee, meals, fuel and airline tickets will rise.

“Low-margin small businesses will now be forced to ‘absorb’ the cost of expensive credit cards payments and pass it on in price increases for all customers, including debit card and cash users,” Mr Kelly said.

“Small businesses and consumers are big losers in this decision, as it will mean higher prices for everyone in an already inflation-shocked economy,”

According to Mr Kelly the only winners are US card duopoly Visa and MasterCard, whom he claims want to hide their high fees from plain sight, as well as banks and payments service providers.