Labor considers ban on debit card surcharges

The federal government says it may ban debit card surcharges as it hands $2m to the competition watchdog as part of a crackdown on the excessive fees.

The federal government is cracking down on card surcharges. Picture: iStock.

The federal government is weighing a ban on debit card surcharges, handing over $2.1m of new funding to the competition watchdog as part of a crackdown on excessive card payment fees.

The move comes as the Reserve Bank reviews merchant card payment costs and surcharging, amid growing frustration over the card payment fees incurred in everyday transactions.

As the central bank reviews merchant costs and surcharging, the government, in a pre-election year, says it is working to reduce payment fees for small businesses and consumers and is prepared to ban the debit card payment transaction fees from January 2026.

“My government’s No.1 priority is to ease the cost of living for households and businesses, and this is another step to protect Australians,” Prime Minister Anthony Albanese said. “That’s why we have announced this additional funding for the ACCC while we wait for further work by the Reserve Bank of Australia.”

The declining use of cash and the rise of electronic payments means more Australians are getting slugged by surcharges, even when they use their own money.

Card transactions and tap-and-go phone payments are estimated to cost Australians up to $4bn a year, according to research released by Canstar earlier this year.

The RBA is responsible for regulating the payments system and its first consultation paper on the merchant costs and card transaction fees is due for release on Tuesday.

The $2.1m handed to the Australian Competition & Consumer Commission, meanwhile, will see the consumer watchdog crack down on illegal and unfair surcharging practices and increase education and compliance activities.

“This is all about getting a better deal for consumers, reducing costs for small businesses and promoting a more competitive payments system,” Jim Chalmers said.

“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.

“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,” the Treasurer added.

Financial Services Minister and Assistant Treasurer Stephen Jones said removing the surcharges would give small businesses and consumers a fairer go.

“The surcharges pile up and punch a big hole in the wallets of customers and the takings of small businesses owners,” he said. “This is good news for consumers and for small business owners and will help our payment systems keep up with the digital economy.”

The crackdown on card surcharges comes years after the practice was banned in Britain and Europe, where businesses must absorb the costs of the card transaction fees.

The government says it wants to ease costs for consumers without adding to the costs for small businesses, or any unintended consequences for the broader economy.

Originally published as Labor considers ban on debit card surcharges