Proposed debit card surcharge ‘crackdown’ gets mixed reactions from customers, small businesses and big banks

Wendy Armitage was expecting the “ouch factor” when she went to pay her bill at a car repair shop in Adelaide a fortnight ago.

When he went to pay his $900 deductible, the former accountant was surprised to see he would have received a substantial surcharge for the convenience of tapping his card.

“On their sign next to the point of sale, it said there was a 16.5 percent card surcharge,” he told The Business.

“I was surprised, to be honest.”

Initially thinking the surcharge was the wrong decimal, Ms Armitage asked and was told she had read it correctly.

“So out of my $900 excess bill, the card charge would have been $148.50,” he said.

The poster specified that all “tap” options would receive the 16.5 percent surcharge, regardless of whether it was a debit or credit card, while a lower surcharge of just 30 cents would apply if you entered your card and enter your PIN.

In the end, Ms. Armitage saved herself $148.20 simply by entering her card and entering her PIN.

“I’ve saved a lot of money eating out.”

Small businesses like Hamed Allahyari’s cafe in Melbourne’s west are also facing rising costs, in addition to fees for processing card payments.

While a proposal to ban surcharges may seem like welcome news to the owner of Cafe Sunshine and Salamatea, he worries it will be another cost to pass on to his customers by raising his prices.

“Unfortunately, we would have to change the menu and change the prices … so it would be difficult for customers to spend money,” he told The Business.

“The additional cost will be borne by us.”

“A long hard look”

On Tuesday, the federal government issued a strong warning to banks and payment providers announcing it was considering banning debit card surcharges to prevent excessive fees.

The ban would take effect from January 2026 and would depend on the Reserve Bank of Australia’s review of Australia’s retail payments system.

The central bank’s review will examine the costs faced by merchants when accepting card payments and the surcharge framework.

“In an environment of increased cost of living concerns, card payment costs and surcharges are attracting more attention from merchants and consumers,” the RBA said in a statement.

Analysis of RBA data has previously estimated that Australians lose almost $1 billion each year to card surcharges.

“Consumers are right. They don’t think it’s fair that they get reduced fees for accessing their own money, especially when it’s becoming increasingly difficult for them to access their cash through an ATM or a bank branch,” he says. Deputy Treasurer Stephen Jones told The Business.

But Mr Jones did not say who should be responsible for bearing the cost.

“We don’t want small businesses to be the meat in the sandwich here,” he said.

“We want consumers to get a benefit, we want small businesses to get a benefit, and we want banks and system providers and network providers to look at themselves about the charges they’re passing on to small businesses. and consumers

“Profit capture” or the cost of doing business?

Australian Banking Association chief Anna Bligh said the charges were costs businesses had to pay.

“There are many places in the world where surcharging is not allowed,” he said.

Card transactions in Australia via the EFTPOS network currently cost businesses an average of 30 cents per $100 purchase.

If that transaction goes through the Visa or Mastercard network, it costs an average of 50 cents, and it costs companies even more to process if the purchases are made with a credit card.

Ms Bligh said she welcomed the RBA’s review of the country’s retail payments system, which would examine options to reduce transaction costs.

“There is a cost to running a fast, efficient and secure payment system,” he said.

“We need to get an outcome that’s fair to consumers, one that’s fair to businesses and one that recognizes that you can’t have a secure, fast and efficient payments system without a cost in all of that.

“Now is an opportunity to talk and get a better answer on where those costs should be allocated.”

David Bassanese, chief economist at Betashares, said the RBA’s review would also shed light on whether transaction costs are aligned with the fees charged.

“The question is, what do these fees cover?” he said

“Are there underlying costs that cover these fees, or is it really a bit of a profit on the part of companies exercising their market power in this area?

“The bottom line here is that we have to make sure that the underlying rates are in line with the underlying costs that these companies are paying.”

The RBA’s review of retail payments regulation will be completed next year.