New Rules to Eliminate Sneaky Fees for Card Payments
The Reserve Bank has announced significant changes to the way businesses handle card payments, aiming to eliminate hidden fees that have long been a source of frustration for consumers. These reforms will ban surcharge fees for EFTPOS, Mastercard, and Visa transactions, which are believed to cost consumers approximately $1.6 billion annually. Additionally, the cap on interchange fees—fees paid by businesses to card issuers during transactions—will be removed, potentially saving businesses around $910 million each year.
However, the changes have sparked mixed reactions. Business groups, particularly in the hospitality sector, have criticized the move, arguing that they will be forced to increase menu prices to cover the costs they can no longer pass on to customers. This could mean that consumers, especially those dining out, may not see any real savings from the new rules.
Industry Reactions and Concerns
Wes Lambert, CEO of the Australian Restaurant and Cafe Association, warned that consumers would be the biggest losers from the change. He pointed out that many restaurants are already struggling with rising costs and may not be able to absorb the financial impact of the new regulations. Similarly, the Australian Hotels Association expressed concerns, suggesting that the only winners would be the banks and questioning the overall effectiveness of the reform.
Despite these criticisms, the Reserve Bank reported that three out of four surveyed consumers want payment costs to be included in advertised prices. Treasurer Jim Chalmers supported this idea, emphasizing that Australians dislike unexpected charges when making payments. He also highlighted that reducing interchange fees could benefit small businesses, encouraging them to pass on savings to customers.
Consumer Groups Welcome the Changes
Consumer group Choice welcomed the reforms, calling them long overdue. Morgan Campbell, policy boss at Choice, stated that the changes would help household budgets, especially during tough economic times. “At a time when so many are doing it tough, the last thing consumers need is to be hit with a surprise surcharge at the checkout,” he said.
Digital finance expert Angel Zhong, a professor at RMIT, noted that the surcharge ban must be paired with fee regulation to ensure that cost pressures do not simply shift elsewhere. She warned that without such measures, card reward programs might become less generous as costs are rebalanced across the system.
The Evolution of Card Payments
Consumer card transactions have grown significantly over the past two decades. In 2007, card payments accounted for about 25% of all transactions, but by 2022, this figure had risen to 75%. Surcharges came into the public spotlight in 2015 when airlines like Qantas, Jetstar, and Virgin were charging more than $7 per transaction, far exceeding the actual cost of processing the payment.
Then-Prime Minister Malcolm Turnbull introduced a cap on surcharges, limiting them to the actual cost of accepting a card payment. However, companies across various sectors continued to impose these fees, leading to widespread criticism. The RBA acknowledged that the current surcharging framework, introduced over two decades ago, is no longer effective in guiding consumers toward efficient payment choices.
Implementation and Future Steps
The RBA will implement the changes under its existing powers without requiring new legislation. Lowering the cap on interchange fees is expected to benefit small businesses the most, as they often pay higher fees. Improved transparency, achieved by requiring card networks and large acquirers to publish their fees, is also recommended to foster competition between networks.
The surcharge removal will take effect on October 1. In April 2027, an interchange cap on foreign cards and transparency measures for card networks will be implemented.
