Card payment surcharge reform must be fair to small business and consumers
Australians are tapping their cards more than ever, but the frustration of unexpected surcharges remains a persistent bugbear.
A recent CHOICE survey found two-thirds of Australians have been hit with a debit card surcharge without warning. Nearly 70 per cent didn’t expect to pay more for using their own money.
As ATMs disappear and digital payments become the norm, consumers often have no choice but to accept the extra cost. The Coalition understands that frustration. We believe Australians deserve transparency.
The price on the tag should be the price they pay. As the Australian Competition and Consumer Commission has warned, any surcharge above the cost of accepting the payment is illegal. It must also be clearly disclosed.
Hidden fees at the checkout undermine trust and hit families already stretched by cost-of-living pressures.
But this issue isn’t black and white. Behind every card payment is a merchant paying fees to banks and card schemes. For small businesses such as cafes, newsagents and family-run retailers, those fees add up fast. They operate on razor-thin margins.
Nearly half didn’t turn a profit last year. For many, absorbing a 1-2 per cent merchant fee on each sale would be unsustainable. That’s why some small businesses add a surcharge. It’s not to gouge customers, but to stay afloat.
Australian Small Business and Family Enterprise Ombudsman Bruce Billson puts it clearly: “Small businesses have such tight margins … they cannot absorb this fee.”
In fact, Reserve Bank research shows that small businesses pay significantly more in merchant fees than large retailers, sometimes as much as three times.
Coles or Qantas can use their buying power to negotiate discounted rates. A suburban bakery cannot. The current system is stacked against small players, and that must change.
Only about 10 per cent of small businesses impose a surcharge.
Most choose not to, and instead bundle the cost into their prices, which is a quiet penalty all customers pay, even those using cash. The Council of Small Business Organisations Australia makes the point that removing surcharges doesn’t remove the cost, it just hides it.
That’s not fair to consumers or small business. The Reserve Bank’s recent consultation paper has kicked off a renewed debate.
The RBA proposes removing surcharges on EFTPOS, Visa and MasterCard by July 2026, while reducing the wholesale fees banks charge merchants.
If done right, the RBA argues this could save consumers $1.2bn a year. The RBA assures that small businesses would be the biggest beneficiaries of lowering fee caps, since “they tend to pay fees closer to the existing caps”.
By RBA estimates, 90 per cent of small merchants would come out better off under the proposed fee reductions, with roughly $185m in savings flowing to small business overall. That, the RBA suggests, should more than offset the loss of surcharge revenue for the minority who currently add fees. But the view is contested by small business.
The Coalition supports the principle of lower fees and better transparency. We’ve long championed least-cost routing, which is a simple reform that sends tap-and-go payments through the cheapest available network. It’s a practical way to reduce costs, especially for small business. But we are cautious about any blanket ban on surcharging unless the underlying costs are addressed.
If merchants still face high fees but are banned from recovering them, they’ll have no choice but to raise prices. Consumers would still pay, just in a different and less visible way. That’s why the sequencing of reform matters. If surcharges are to go, then the cost of accepting cards must fall and fall fairly.
The Coalition believes interchange fees should be reduced. We support greater transparency from banks and card providers. And we should not stand for a system that continues to punish small businesses while cutting deals for big corporates.
Treasurer Jim Chalmers has said consumers shouldn’t be punished for using cards, and small businesses shouldn’t be punished for accepting them.
We agree. That is the balance this reform must strike. The Coalition will always back small business. We believe in practical, pro-consumer reforms that don’t leave small operators carrying the can. Our focus is on solutions that reduce costs across the system and not just shift them around. Surcharges are unpopular. But they are also a symptom of a broader problem and a payments system that lacks transparency and fairness.
Fixing it requires thoughtful reform, not blunt-force bans. The Coalition is committed to a better deal for consumers and a fair go for the small businesses that serve them.
Sussan Ley is the federal Leader of the Opposition.
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