By Millie Muroi
Australia’s major airlines have defended credit card surcharges and warned prices could rise if the controversial card fees are scrapped, after the nation’s biggest bank called for an end to the practice.
The warnings from Qantas and Virgin Australia published on Friday come as the Reserve Bank weighs whether to tell the government to ban surcharges or push for other changes to the fees that have become more contentious as the number of Australians using cash falls.
Currently, businesses can impose a surcharge – a fee paid by consumers for using the card payment system – but the amount must not be more than what it costs the business to use that payment type, which generally ranges between 0.5 per cent and 1 per cent of the purchase for Visa and Mastercard debit cards.
Treasurer Jim Chalmers has said he is prepared to ban debit card surcharges by January 1, 2026, subject to the Reserve Bank review that is expected to be completed later this year and protections for small businesses and customers.
In its submission, Qantas said surcharging gave businesses and consumers choice about how they paid, and that allowing firms to recover the cost of accepting card payments helped keep prices in check.
“In the current inflationary environment, many merchants are facing increased costs of doing business and a removal of the ability to surcharge may result in a proportionate increase in the price of the underlying product,” the airline’s submission reads.
Virgin Australia said card payment fees let it keep airfares low. “If the ability to pass on card payments fees is removed, this may result in the cost of card acceptance being passed on to all consumers as higher prices,” the company said.
Both airlines let customers pay without a fee but make it more convenient to pay using cards that can add $50 or more to the price of costly international return flights, or much less for cheaper routes and seats.
Virgin said many of its customers choose to pay via credit cards to access additional benefits including loyalty points, insurance benefits, and fraud and purchase protections.
But the country’s biggest bank, CBA, said a complete ban on surcharging would be the simplest outcome for consumers, in line with regions including the European Union, helping to wipe out the practice of excessive surcharging and the challenges of enforcing current standards. It suggested a cap on credit card fees as a fallback position if the government opted only to ban surcharges for debit cards.
Payments company Mastercard said there should be a complete ban on surcharges across all card types. “A debit-only ban is just going to increase the credit surcharges,” said Rich Wormald, its Australasian division president.
The Australian Competition and Consumer Commission (ACCC) said in its submission that between January 2023 and June 2024, it received about 2500 reports about payment surcharging and other add-on costs, with the most common issue being allegations of excessive surcharging.
The claims were most commonly directed at small businesses such as restaurants and cafes, the watchdog said.
The ACCC also warned the retail payments system appeared to have shifted the greatest costs to small businesses and consumers, which tend to be those with the least bargaining power, and called for more transparency about fees set by card schemes and payment service providers.
Qantas and Virgin declined to comment further on their submissions.
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