Warning councils could be about to face a multi-million hit
The looming ban to surcharges on credit and debit cards could cost Australian councils up to $400,000 a year each, totalling $200 million across the entire country, a councillor has warned.
On Thursday, the Reserve Bank of Australia will remove surcharges on any payment made with card, which will mean the advertised price on a product will be how much it will cost.
Credit and debit card surcharges will be a thing of the past from Thursday. iStock
While the RBA claims the move will save Aussie consumers up to $1.6 billion in hidden fees, there are concerns the major banks will simply pass on the costs to businesses and other vendors instead of absorbing the blow.
Small businesses have been vocal in sounding the alarm, warning they will have no choice but to raise prices, and a councillor in an area north of Sydney has warned councils across Australia may have to make tough calls if they are saddled with this new burden without assistance.
“The Federal Government's ban on card surcharging is marketed as a win for consumers getting certainty on the price of their coffee, but one of the hidden realities is that local councils will be millions of dollars worse off per year,” Central Coast councillor Jared Wright said.
“If every council in Australia had the same hit as Central Coast Council - about $350,000 to $400,000 per year - then that would be a $200 million plus hit to the bottom line of local councils across Australia.”
He claimed councils would now face a call on how to cover the shortfall.
Central Coast councillor Jared Wright claims councils will face difficult decisions on how to cover the increased costs. Supplied
“Local councils will either need to raise further revenue from ratepayers or look at service reductions,” he said.
In correspondence to Councillor Wright, the office of Assistant Treasurer Daniel Mulino claimed the RBA intended to lower interchange fees paid by merchants on card purchases; this could include lowering the interchange cap and benchmark to 0.3 per cent, down from 0.8 per cent.
“The RBA estimates these changes will reduce wholesale card payment costs for merchants by around $910 million per year,” a spokesperson for Daniel Mulino told Wright, in a statement seen by nine.com.au.
However, Wright is doubtful of how much of a benefit the Central Coast Council will see from these changes.
“The reduction in interchange fees may make a small difference, but the overarching policy will still be a material hit to the bottom line for local councils across Australia,” he claimed.
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