Debit and credit card surcharges to be removed in Australia by October | Banking
Bank and credit card surcharges will be eliminated by October as part of central bank reforms, with big banks likely to foot the bill for cost-of-living measures.
New rules announced on Tuesday will allow businesses to remove surcharges on Mastercard, visa and eftpos card payments.
The reforms are expected to eliminate fees that around 16% of businesses charge to cover the cost of accessing transaction services. The RBA’s latest review estimated consumers were paying around $1.6 billion a year in surcharges.
The RBA will also lower the cap on fees that organizations such as banks can charge, saving businesses an estimated $910 million a year.
Finance Minister Jim Chalmers said the changes to the RBA would help with living costs and could be made without the need for parliamentary action.
“Australians hate paying these costs,” he told reporters on Tuesday.
Payment plans will still be costly to operate and businesses will still have to pay providers. The RBA predicts that without access to surcharges, shelf or menu prices will likely increase by a one-off 0.1%, and shelf or menu prices will also have to increase.
The Australian Hoteliers Association criticized the decision, with CEO Stephen Ferguson saying it would not make the typical coffee or beer cheaper.
“What was the point of this whole exercise if not to reduce costs for consumers?” he said.
Australians have told the RBA they would prefer to know the final price, even if it was higher, rather than be caught out with a hidden fee.
Most consumers believe they are only sometimes or rarely made aware of surcharges, according to a survey commissioned for review by the RBA. Three quarters of respondents think surcharges are unnecessary and should be stopped.
Banks and some companies argued that the surcharge was necessary to cover the complex costs of the payment system, including credit cards and rewards.
While consumers, small and large businesses and card networks are likely to benefit, banks stand to lose revenue from charging businesses, the RBA’s review found.
Some banks had suggested they would have to increase credit card fees and interest rates while reducing rewards and points. The RBA found this would be an intended consequence of the reforms as debit card surcharges already subsidize rewards accruing to credit card holders.
Smaller non-bank payment service providers Square and Tyro welcomed the reforms; Nigel Lee, managing director of Tyro, said increased transparency would make it easier for businesses to choose a provider.
