Debate on payment card surcharges to heat up as Reserve Bank prepares for consultations

The polarising issue of debit and credit card surcharging will come to the fore again in coming weeks, with gouging at the payment terminal becoming more commonplace.

The RBA is conducting a sweeping review of merchant costs and surcharging in the credit and debit market. Picture: Getty Images

The polarising issue of payment surcharging will come to the fore again in coming weeks, as the Reserve Bank prepares to start consulting with interested stakeholders.

Surcharging has attracted its fair share of controversy over the past year, as gouging at the payment terminal has become more frequent.

It’s an issue that is even more pertinent as cost of living pressures bite. National Australia Bank chief Andrew Irvine in August questioned whether card surcharges were fit-for-purpose, after being slugged with a 10 per cent surcharge on a coffee in Sydney.

The RBA – which is conducting a sweeping review of merchant payment costs and surcharging – has trawled through submissions received on the topic and consultations will begin in coming weeks. That comes ahead of a report being completed around the middle of the year.

RBA governor Michele Bullock and other senior central bank executives will front a House of Representatives economics committee in Canberra on Friday, and while interest rates will likely dominate proceedings, a smattering of questions about the review can’t be ruled out.

There are certainly divergent opinions about surcharging given it pits consumers against businesses, with the latter arguing they need to recoup costs.

The Australian Competition and Consumer Commission’s feedback to the RBA said the current system was not achieving its original policy objectives.

“Greater costs have fallen on the actors in the system with the least bargaining power – consumers and small business merchants,” the submission said.

The ACCC cited data showing that between January 2023 and mid-2024 it received approximately 2500 reports about surcharging and other add-on costs, with the bulk reflecting allegations of businesses engaging in excessive surcharging.

The regulator conceded it was difficult to ascertain if consumers understood the costs borne by businesses to process payments, making analysis of the reports problematic.

The data showed that alleged excessive surcharging issues were most common in sectors with a high proportion of smaller and micro businesses, in particular in food and beverage services.

Visa’s submission said if a surcharging ban were to be introduced it should apply to debit and credit products for regulated networks only. The payments giant also unsurprisingly urged that domestic interchange fee rates remain at current levels, arguing further compression would hinder innovation.

Consumer group CHOICE supported the proposed ban on surcharges for debit card payments, but called for a maximum surcharge amount for credit card transactions.

Westpac’s submission also supported a ban on surcharging for debit transactions, but didn’t call for a prohibition on credit payments.

The bank said a cap on surcharges for credit card transactions should be applied, alongside the ACCC upping enforcement.

Commonwealth Bank called for a complete ban on surcharging across debit and credit, labelling that the “simplest outcome” for consumers.

Originally published as Debate on payment card surcharges to heat up as Reserve Bank prepares for consultations