The Reserve Bank of Australia has announced plans to remove surcharges on debit and credit cards.

As part of a package of reforms, surcharging on debit, prepaid and credit cards on the designated eftpos, Mastercard and Visa card networks will be removed. This is intended to make card payments simpler, more transparent and increase competition among payment service providers.

“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,” says the RBA.

“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 other announced reforms include:

• Lowering the caps on interchange fees paid by Australian businesses
• Increasing transparency over the fees charged by card networks and payment service providers to strengthen competition. 

Most of these changes, including the removal of surcharging and reductions in the interchange caps for domestic card transactions, will come into effect on 1 October 2026. The introduction of an interchange cap on foreign cards and some changes to payment cost transparency will come into effect later on 1 April 2027.

Backed by government

In a statement following the announcement, Australian Treasurer Jim Chalmers says Australians will no longer have to pay $1.6 billion a year in surcharges and small businesses will save $910 million.

“These changes will take pressure off consumers and businesses and help with the cost of living,” he says. “People shouldn’t be punished for using a credit or debit card.”

Retail responds

The Australian Retail Council (ARC) has, however, noted that the decision will add to cost pressures across the retail sector, particularly for smaller businesses already operating on tight margins.

ARC CEO Chris Rodwell says while lower interchange fees and stronger transparency measures for businesses are positive steps, the removal of surcharging strips away a significant cost recovery mechanism.

“Retailers don’t surcharge by choice. Lower interchange fees and greater transparency are welcome steps, but they don’t eliminate the cost of accepting card payments, nor do they guarantee that savings will be passed through in full,” he says.

“Removing surcharges reduces the flexibility retailers have to cover those costs, and that pressure will be felt most by smaller businesses already facing a cost-of-doing-business crisis.

“This is another layer of cost in a system where retailers are already dealing with rising expenses across wages, energy, rent, compliance and supply chains. The focus must now be on reducing the overall cost of doing business, not adding to it.”

Small business responds

Similarly, the Council of Small Business Organisations Australia (COSBOA) has welcomed lower fees and transparency but says changes must flow through before surcharging is removed.

COSBOA Chair Matthew Addison says removing surcharging without first ensuring lower costs are delivered to small businesses risks shifting more pressure onto already tight margins.

“If you ban surcharging without guaranteeing lower fees, small businesses have no choice but to absorb the cost and that will ultimately be reflected in prices,” he says.

COSBOA says small businesses don’t control how customers choose to pay, but they do carry the cost of those payment methods.

“Surcharging has been one of the only ways small businesses can recover these costs,” says Mr Addison. “If you remove that without fixing the underlying fees, you’re asking small businesses to wear them.”

COSBOA welcomes the focus on reducing payment costs, but says the key issue is whether those savings are passed through in full.

“Lower fees are only meaningful if small businesses actually see the benefit in what they’re charged,” says Mr Addison. “Without clear pass-through, this reform doesn’t deliver real relief.”

COSBOA also supports stronger transparency measures, noting they are critical to helping small businesses understand and manage their payment costs.

“Greater transparency is a positive step, but small businesses need time to see what their new costs are, understand them, and have the opportunity to shop around,” says Mr Addison.

COSBOA says removing surcharging before this happens risks getting the sequence wrong.

“Banning surcharges before businesses can see lower fees and understand their costs is putting the cart before the horse,” says Mr Addison.

To ensure the reforms work for small business, COSBOA says the package must deliver:

• Real reductions in payment costs that are passed through to small businesses
• Clear and accessible pricing so businesses can compare providers
• Wider availability of least-cost routing to keep payment costs down

Mr Addison says implementation timing will be critical.

“Small businesses will need time to see the impact of these changes, adjust their pricing, and update systems,” he says.

“Without a practical transition, they risk being hit with the cost before the benefits arrive.”