For Australian shoppers, the extra charge for paying by card is about to disappear. Starting October 1, businesses across the country will be barred from adding surcharges to Mastercard, Visa, and EFTPOS transactions under new rules from the Reserve Bank of Australia (RBA).
The rules means retailers will no longer be able to charge customers extra for paying by card, whether they shop in person or online. Most large payment service providers in Australia intend to remove surcharging functionality from the terminals they provide to businesses by the time the rules take effect.
Cutting Interchange Fees to Compensate
To help offset the loss of surcharge revenue for merchants, the RBA is simultaneously lowering interchange fee caps. For domestic-issued consumer credit cards, the interchange fee cap will fall from 0.8% to 0.3%.
Interchange fees for foreign-issued cards will be capped at 1% beginning April 1, 2027. The RBA estimates that the lower interchange fees will save businesses roughly $910 million annually.
Debit card interchange fee limits will also decline, from 0.2% to 0.16%, while the cap for commercial credit cards will remain at 0.8%.
Potential Drawbacks for Consumers
The RBA estimates that eliminating surcharges will save consumers $1.6 billion annually. However, consumers may not see all of those savings at the checkout. Businesses could choose to absorb the cost of accepting cards or pass some of it on through higher prices.
“It’s less of a headache for consumers who are being surcharged to use their cards at the point of sale, but many merchants will need to absorb those costs of card acceptance that they were trying to reduce through surcharging,” said Ben Danner, Senior Analyst, Debit at Javelin Strategy & Research. “We may see higher item prices among smaller merchants who are unable to absorb the added costs.”
Rewards programs could also be affected. Because interchange fees are one source of funding for card issuers, lower fees could make it more difficult for issuers to sustain generous rewards programs.
In the U.S., debit card surcharging is already prohibited nationwide by Visa and Mastercard. Credit card surcharging remains legal in most states, although it is prohibited in Massachusetts, Connecticut, Maine, and Puerto Rico.
