Debit card surcharge ban in government’s sights

Surcharges paid by Australians using debit cards could be banned, as the federal government prepares to scrap the extra cost amid growing resentment among the nation’s shoppers at being charged to use their own cash.

Ahead of a Reserve Bank inquiry into the payments system, Prime Minister Anthony Albanese and Treasurer Jim Chalmers on Monday signalled they would directly intervene in the financial system to push down costs imposed on retailers and their customers.

Small businesses are often forced to pass on the cost of the electronic payment system to shoppers.Credit: Shutterstock

The use of cards, phones and smartwatches to pay for goods and services was supercharged by the COVID-19 pandemic. In 2022, cards accounted for more than three-quarters of all payments, with debit cards used in 51 per cent of cases. Cash now accounts for just 13 per cent of transactions.

While major retailers usually don’t charge surcharges for these payments, small businesses are often forced to pass on the cost of the electronic payment system to shoppers. Those surcharges can vary widely, from 1 per cent of the cost of a purchase up to 10 per cent, with the total cost imposed on consumers estimated at up to $4 billion a year.

By law, businesses can impose a surcharge on card payments, but it must not be more than it costs the business to use that payment type. They must also offer a fee-free payment system, usually cash.

Albanese and Chalmers said the Australian Competition and Consumer Commission, which has legal responsibility for policing surcharges, would get a $2.1 million funding boost to target “illegal and unfair surcharging practices”.

But Chalmers said in light of the RBA review of the payments system, the government was prepared to outlaw surcharges on debit card payments from the start of 2026.

“Consumers shouldn’t be punished for using cards or digital payments, and at the same time, small businesses shouldn’t have to pay hefty fees just to get paid themselves,” he said.

“We’re prepared to ban debit card surcharges, subject to further work by the Reserve Bank and safeguards to ensure small businesses and consumers can both benefit from lower costs.”

An outright ban would be a significant move as the Reserve Bank has, since the advent of non-cash payment systems, sought to use competition among providers and retailers to drive down consumer fees.

But in evidence to a parliamentary inquiry in August, Reserve Bank governor Michele Bullock conceded there were issues around the payments system and the use of surcharges.

Bullock said competition between providers and retailers should encourage lower fees, but noted businesses were required by law to offer a fee-free form of payment.

The Reserve Bank review of the payment system will examine the high cost of card payments for small businesses and the surcharging of consumers.

The bank will release its consultation paper on the review on Tuesday.

Labor MP Jerome Laxale says big banks and card providers gouge $4 billion annually in card surcharge payments.Credit: Alex Ellinghausen

The RBA has already signalled that it will consider whether “further regulatory intervention” is required to keep a lid on fees faced by retailers and consumers.

Last week, Labor backbencher Jerome Laxale launched his own petition to end debit card surcharging. He noted that when phone text messages were introduced, they cost 25¢ a message, but those had collapsed to nothing.

Independent Payments Forum co-founder Brad Kelly said debit cards were being marketed by banks as a simple way to access cash, but “unfair pricing constructs” around the electronic payments system meant businesses and consumers were paying for that system.

The forum and the Australian Association of Convenience Stores are seeking to separate credit from debit card surcharges, a cap on fees imposed on retailers and the public release of all card fees on the Reserve Bank’s website.

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