From 1 October 2026, Australian consumers will not pay surcharges on most credit and debit card payments for purchases of goods and services. This reform will save consumers about $1.8 billion per annum. The Reserve Bank of Australia (RBA) will also lower interchange fees, saving businesses $910 million annually in reduced transaction fees.
Three areas of reform by RBA
- Surcharge abolished
Surcharging no longer works as intended. Previously, surcharging encouraged consumers to use cheaper payment methods. However, it has become harder for consumers to avoid surcharges. Consumers and businesses find surcharging rules complex and confusing, surcharges are often not well disclosed, and 76% of consumers want surcharging to stop as this is a sneaky charge when they tap and go.
Currently, the size of a surcharge varies depending on the type of card used and the cost to the merchant for accepting that payment. Eftpos surcharges are typically less than 0.5%, Visa and Mastercard debit surcharges are between 0.5% and 1%, and Visa and Mastercard credit surcharges are between 1% and 1.5%.
- Interchange fees reduced
The RBA is lowering the maximum interchange fees that businesses pay for debit and consumer credit card payments. They are also introducing a cap on interchange fees for foreign card payments. This should help to reduce card payment costs, especially for small businesses.
Interchange fee caps will now be lowered from 0.8% to 0.3% for consumer credit cards, and from 0.2% to 0.16% for debit cards. The new interchange fee on foreign-issued cards will be 1%, while commercial credit cards’ cap will remain at 0.8%.
This reform will particularly benefit small operators. Australian small businesses are working with some of the smallest margins in the economy. The average margin on a caffe, for example, is about 3% to 3.5%. If they incur a merchant service or interchange fee of 1% to 1.2%, that’s half their margin gone.
- Transparency in card payment fees
Under this reform, Mastercard, Visa and eftpos will have to publish the fees they charge. This will create competition over fees in the market and help businesses check how their fees compare with other providers. All businesses will get standardised information on their statements, which can help them to get accurate quotes from different providers.
Impacts on customers
After the RBA announced sweeping payment reforms, business groups are warning that cafes, bars, restaurants and shops will raise their prices to pass on added costs they will face from a looming ban on credit and debit card surcharges. Therefore, consumers may ultimately face higher prices on their purchases. However, the higher prices paid by consumers may be similar amounts as they are paying now, just in a different form, via the tag price rather than the surcharge.
The removal of surcharging means the price on the price tag is the final price the consumer ends up paying. Hence, the reform provides consumers with more certainty and transparency on their transactions.
Effects on businesses
The reductions in interchange fees should lower card payment costs for businesses and they will no longer have to understand and follow the complex surcharging rules. It will be up to them to choose whether to include payment costs in their tag prices when surcharging ends, just as they do with all their other costs.
Interchange fees are a significant funding source for banks in covering the costs for reward points which would be adversely impacted.
It is a deep concern that the abolition of surcharging will mostly hit small businesses. There’s only so much they can charge for a cup of coffee or an item of goods and services. They don’t want to be charging their customers any extra to upset them in case they might go elsewhere for shopping.
Concluding remarks
The reforms declared by the RBA on 31 March 2026 would make card payments simpler for consumers and help businesses get better value from their payment services. These changes represent a structural shift in the market towards greater transparency and stronger competition, creating an environment that will ultimately enhance Australian economic growth.
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