Threat to outlaw debit card surcharges under crackdown

The Albanese government has announced a crackdown on excessive card surcharges and is threatening to ban the practice entirely if retailers and card companies don’t toe the line. But business groups are warning there could be unexpected consequences for consumers.

In what is intended to be the first step in an ongoing fight against excessive and unfair debit card surcharges, the government has announced $2.1 million of new funding for the Australian Competition and Consumer Commission (ACCC) to tackle excessive surcharges and promising further work to reduce payment fees.

But that’s not all they’re promising. The government says it is prepared to ban debit card surcharges entirely and that the Reserve Bank of Australia (RBA) is conducting a review into merchant card payment costs and surcharging, the first stage of which has been released to the public.

“We are prepared to ban debit card surcharging from 1 January 2026, subject to the consultation undertaken by the RBA, and sufficient steps and safeguards to ensure both small businesses and consumers can benefit from lower costs,” the announcement reads.

The government says the declining use of cash and subsequent rise in electronic payments mean that more Australians have no option but to pay surcharges, and businesses are taking advantage.

Speaking to reporters in Brisbane, Prime Minister Anthony Albanese said his government believed consumers should not be charged a fee for using their own money.

“My government’s number one priority is to ease the cost of living for households and businesses, and this is another step to protect Australians,” he said.

“A debit card is taking money directly from people’s accounts. It is their money and there shouldn’t be surcharges on it.”

Federal Treasurer Jim Chalmers said the goal of the crackdown was about getting a better deal for consumers, reducing costs for small businesses and promoting a more competitive payments system.

“Consumers shouldn’t be punished for using cards or digital payments, and at the same time, small businesses shouldn’t have to pay hefty fees just to get paid themselves,” he said.

A win for cash payments

The decline of cash in society has been a difficult transition for many older Australians, and the Council on the Ageing (COTA) welcomed the government’s announcement.

COTA Australia chief executive officer Patricia Sparrow said giving older Australians access to a fee-free form of ‘digital cash’ is crucial.

“Being charged additional fees is a bugbear of many older people who are concerned about the increasing removal of cash as a payment option,” she said.

“As it becomes harder and harder to pay with cash, people are being left with no option to pay for goods that doesn’t seem them hit them with additional charges.

Consumer group CHOICE also praised the move, with head of policy Tom Abourizk noting Australia actually has a relatively low-cost electronic payment network.

“Australia has a very low-cost EFTPOS network that debit transactions can pass through to avoid fees from multinational card companies like Mastercard and Visa,” he said.

“Card surcharges are often disclosed at the checkout at the very last minute when it’s too late to avoid them. People should be able to expect that the advertised price is the amount that gets taken out of their bank account.”    

He said small businesses were at the mercy of the payment giants, who often charged them exorbitant fees for processing their payments.

“Small businesses often pay many times more to process card payments compared to the cheaper rates that card terminal providers charge larger businesses.

“Along with a ban on surcharges for consumers, reforms must ensure small businesses can get a fairer deal on the costs of processing both debit and credit cards.”  

Unintended consequences

Business groups have hit back, suggesting banning debit card surcharges may not lead to lower prices. Australian Restaurant and Cafe Association CEO Wes Lambert told AAP that removing surcharges altogether could lead to higher costs for consumers in the long run.

“It would lead to higher surcharges and fixed fees that businesses would have to pass on to customers,” he said.

“While we fully support lower costs overall for processing debit cards, what we don’t want is too many unintended consequences.”

It seems the federal Opposition agrees. Liberal senator Bridget McKenzie told news.com.au that it’s inevitable that the cost of processing the payment will end up being paid by the consumer anyway.

“We know that someone’s actually going to end up having to pay for the cost of taking the payment,” she said.

“And it’s our small businesses, our cafes, our pubs and our customers that are actually going to end up paying more because the surcharge will just mean higher prices in the end.”

Do you think debit card surcharges should be banned? What would a compromise solution look like? Let us know in the comments section below.

Also read: What are the rules behind extra fees and charges applied to purchases?