RBA to end card surcharges as cash usage dwindles

The Reserve Bank has announced an end to surcharges on bank card payments, as cash usage continues to dwindle - but not everybody is happy about it.

The RBA's new paper, published following an extensive consultation with stakeholders, found that surcharging on debit, pre-paid, and credit cards should end on eftpos, Mastercard, and Visa networks.

"The surcharging framework, introduced more than two decades ago, is no longer achieving its intended purpose of steering consumers towards making more efficient payment choices," the RBA said in a release.

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"The increased prevalence of businesses surcharging all cards at the same rate, challenges with enforcing the current surcharging framework, and consumers using less cash have reduced the effectiveness of the surcharging regime."

The paper found removing surcharges would make card payments simpler and more transparent, while also increasing competition among payment service providers.

"Removing surcharging also aligns with the preference of most consumers for payment costs to be incorporated into advertised prices," the release said.

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However, the Australian Hotels Association says the decision lets down both consumers and businesses.

"The RBA's decision today doesn't pass the pub test - instead of backing consumers and small businesses, the RBA has backed the banks, Visa, Mastercard and payments companies," chief executive Stephen Ferguson said.

"It's all smoke and mirrors - consumers and small businesses have been abandoned in the middle of a cost-of-living crisis."

Ferguson said the RBA confirmed the total cost of a coffee or beer won't decrease as a result of its decision.

"What was the purpose of the whole exercise if it wasn't to decrease costs for consumers?" he said.

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"Worse still, even if you pay cash now, they'll still have their hands in your pocket thanks to today's decision.

"People using their own money will still be subsidising the cost of those who borrow money."

RMIT University finance professor Dr Angel Zhong, however, welcomed the changes.

"The RBA's decision to ban card surcharges reflects the reality that, in a cash‑light economy, surcharging no longer works as an effective consumer choice mechanism," Zhong said.

"The advertised price should increasingly be the final price, reducing confusion and frustration at checkout.

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"Payment costs do not disappear, and how much is absorbed by businesses versus passed on to consumers will depend on how the reforms are implemented in practice."

Zhong said surcharge bans worked best when tightly paired with fee regulation.

"Without this, cost pressures risk shifting rather than easing," Zhong said.

"International experience indicates that reducing or banning surcharges may result in less generous card rewards programs, as costs are rebalanced elsewhere in the system."

Other changes coming into force

The RBA will also lower the caps on interchange fees paid by Australian businesses.

"These changes are expected to lower businesses' costs when they accept domestic or overseas card payments," the RBA release said.

"Small businesses should benefit the most because they tend to pay fees closer to the existing caps."

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Transparency will also increase over fees charged by card networks and payment service providers.

"Improving transparency will enhance competition between players within the payments chain, put downward pressure on card payment costs and make it easier for businesses to shop around for a better deal," the release said.

Card surcharges will end on October 1, 2026, while the reduction of the interchange caps for domestic card transactions will come into force on the same day.

The introduction of an interchange cap on foreign cards and some changes to payment cost transparency will come into effect later, on April 1, 2027, as the RBA said more time was needed for the payments industry to make these more "complex" changes.

A new public consultation will begin mid-year to look into other areas of the retail payments system, including mobile wallets, three-party card networks, "buy now pay later" services, and e-commerce platforms.

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