In a long overdue move that will help protect consumers from unnecessary fees, the government has finally confirmed that it is set to outlaw debit card surcharges.
It will outline its framework on Tuesday, at the same time that the Reserve Bank of Australia is also launching a comprehensive review of payment costs for retailers.
Analysts suggest that shoppers in Australia are saddled with around $1.5 billion annually on debit and credit card surcharges.
The proposed ban does not extend to credit cards. The EU, for example, has banned surcharges on both debit and credit cards.
But while the Australian government is sticking to tackling debit card surcharges for now, that ban could be introduced from the start of January 2026, subject to consultation with the RBA.
Part of its plans to combat this involves providing an additional $2.1 million in additional funding to the Australian Competition and Consumer Commission to crack down on excessive surcharge fees.
“We’re cracking down on unfair and excessive debit card surcharges. Whether you’re paying by cash or card, if you’re using your own money, it shouldn’t cost you more,” said Prime Minister Anthony Albanese in a post on X.
The RBA will release an issues paper, along with a set of technical explainers, on Tuesday. This will gather industry views on the impact of preventing surcharging.
While the RBA has been waiting for legislation to give it broader powers to investigate surcharging, the bill is stuck in the parliament which has led it to launch the review regardless.
Any move to change the status quo around surcharging would incur costs as banks have to revise payment terminal technology and pricing plans for customers.
About half of a surcharge is paid to the bank that supplies the payment terminal, while 30 per cent is shared between the bank that issues the credit or debit card, and the remaining 20 per cent goes to Visa, Mastercard or any other electronic transfer provider facilitating the payment.
But some executives within the banking industry have already indicated that they support the ban on surcharges, while others aren’t as enthused.
“That is outrageous,” National Australia Bank chief executive Andrew Irvine told a parliamentary inquiry assessing the issue about the fact that he was being charged a 50¢ processing fee on a $5 cup of coffee. “I don’t like the lack of transparency and lack of consistency.”
Commonwealth Bank chief executive Matt Comyn meanwhile took a dramatically different stance on the issue and accused policymakers of using payment costs to engage in populist politics and claimed that the bank’s payment operations actually made a loss.
Under the existing laws, businesses can impose an extra fee on customers to cover payment processing costs.
Some cardholders are being hit with surcharges under so-called blended pricing plans. As part of blended pricing plans, retailers pay the same fee to the bank supplying their terminal, regardless of the card the customer uses. But if the government’s proposed ban on debit card surcharges does go through, merchants will only be able to surcharge on credit card payments.
The government is also believed to be considering whether it should be made mandatory for some essential businesses, such as supermarkets and petrol stations, to accept cash.
The RBA will by way of its review consider other payment policies, including whether fixed, blended and bundled pricing should be banned alongside surcharging.
Some retailers aren’t waiting for the government to ban card surcharges and are already planning alternative payment systems to counter the card surcharges.
Chemist Warehouse, which says it pays around $10 million a year to card companies, is now set to introduce a QR code payment mechanism. It involves customers taking a photo of a QR code instead of paying with a card or tapping a terminal, a process known as Pay by Bank.