Why doesn’t Australia prohibit credit card surcharges, as other countries do?  We look at the issue around fees and the complexities of the payment system that have led to this predicament.

Consumer credit and debit card fees have been forbidden in the United Kingdom since 2018. All consumer surcharges are illegal throughout Europe, with the exception of Diners Club and American Express. Additionally, there is a push to do the same in Australia. However, is the problem as simple as it appears?

 

The desire for transformation

In October 2024, the Reserve Bank of Australia (RBA) began evaluating the fees and levies linked with merchant card payments. Given the rapid pace of technology advancement and complexity, the study considers whether current regulatory frameworks are still acceptable and whether greater transparency is required. Surcharges, transaction fees, and payment policies are all under review. The review’s ultimate goal is to reduce costs for both consumers and retailers.

The Australian Banking Association (ABA) supported a ban on major credit card firms and financial institutions, stating in its response to the RBA report that “the current surcharging framework is clearly not working and requires targeted reform.” 

Customers should never be charged an excessive amount for bundled expenditures such as point-of-sale systems, company software, or other business incentives. When the payment service provider charges a higher fee to provide the merchant with reward points and other incentives, this is referred to as “business incentives.”

When the government announced that debit card levies would be abolished on January 1, 2026, pending the results of the RBA investigation later this year, the movement for a ban gained traction. 

How We Use Digital Transactions and Cards

The RBA generally supports surcharges because they inform consumers about the most cost-effective payment methods and allow market forces to identify the dominant payment providers. And, while this may be true for significant purchases, do we truly pay attention when we tap our watches or phones to get our morning coffee? 

Cards are the most popular payment method in Australia, accounting for three-quarters of all consumer purchases in 2022.

The Australian Banking Association claims that:

• Contactless payments now account for 95% of all in-person card transactions, up from less than 8% in 2010. 
• The percentage of retail payments done online rose from 7% in 2010 to 18% in 2022.
• Mobile wallets (Apple Pay, Google Pay, etc.) have raised their share of point-of-sale payments from 1% in 2016 to 44% in October 2024.
• Almost one-third of Australians now use Buy Now, Pay Later (BNPL) services, which were almost unknown eight years ago.

 

When are surcharges allowed?

Before the RBA’s surcharge rule, businesses regularly applied a flat 3% surcharge. 

Businesses can charge customers more for the “reasonable cost of accepting card payments” under the surcharge regulations. 

This implies:

• A business may only charge a fee for using a card or digital wallet that does not exceed the cost of that payment method. If they are directly tied to the card type being surcharged, these charges, which are computed over a 12-month period, may include gateway fees, terminal fees paid to a provider, fraud prevention, and so on. 

Payment providers are required to submit merchants a statement every 12 months detailing the average percentage cost of accepting each payment method for the company.

• A corporation that imposes a payment surcharge must be able to explain how the amount was calculated. 
• The surcharge cannot be higher than the lowest surcharge specified for a single payment type if applied to all payment types, regardless of kind. 
• If a consumer is unable to pay without incurring a cost, the company must reflect the extra in the price displayed. In other words, if your customer cannot pay with cash or another method that does not incur a surcharge, the price displayed must include the premium.

 

The RBA estimates that, on average, card fees cost:

Card type	Fee
Eftpos	less than 0.5%
Visa and Mastercard debit	between 0.5% and 1%
Visa and Mastercard credit	between 1% and 1.5%.

Source: RBA

 

Excessive surcharging is forbidden for eFtPOS, Debit Mastercard, Mastercard Credit, Visa Debit, and Visa Credit. According to estimates, the Australian Competition and Consumer Commission (ACCC) has received over 2,500 complaints concerning high surcharges in the 18 months from the beginning of 2023.