Card surcharges are ending soon. But the shake-up could come at a cost

Those irritating and often uneven percentages added to bills when you tap to pay will disappear next month, but the cost of using plastic won’t vanish, and prices are set to rise.

Eftpos, Visa, Mastercard, American Express, JCB, and UnionPay purchases will be free from card surcharges from 1 October, saving consumers an estimated $1.6 billion per year. However, because surcharges cover some merchants' banking costs, prices are expected to rise.

Surcharge fees are just one of three changes starting next month. Interchange fees, which banks charge when they process domestic card transactions, will be capped at 0.3 per cent on each payment, down from 0.8 per cent.

Merchants typically absorb these costs, so small businesses are expected to save $910 million when credit and debit card surcharging ends in October, according to Treasury.

And because those fees subsidise frequent flyer and rewards points programs, banks have already started raising annual fees and offering fewer perks.

Finder personal finance specialist Taylor Blackburn told SBS news that some deals at Westpac, ANZ, HSBC, MyCard, and BOQ have either changed or are slated to change from 30 September.

"Sign-up bonus offers have already changed at ANZ, for example, they used to do a $200 credit on your first annual fee, but they're getting rid of that," Blackburn said.

Other frequent flyer bonus offer cards have dropped by 50,000 bonus points, but some banks are improving their offers, so shop around for a better deal now before you get stung by shifting offers, he suggested.

Westpac is lifting interest rates on some of its credit cards and will increase annual fees. NAB credit card interest rates will rise 1.5 per cent too.

Commonwealth Bank announced its Commbank Awards program is changing how consumers earn points in a new loyalty and points scheme.

St George Bank is also lifting interest rates on its Amplify Qantas Platinum credit card and introducing an annual fee of $125. The bank has also dropped the interest-free period on purchases by 10 days.

New interchange caps for foreign-issued cards will start from 1 April 2027.

Australian Banking Association (ABA) chief executive Simon Birmingham said last year the

interchange fees in Australia are "already among the lowest in the world".

"We agree with the RBA’s concerns about fairness for small businesses, but there are better, more targeted ways to address this without destabilising the broader payments system — such as a small business interchange rate."

The European Union caps fees for debit cards at 0.2 per cent and consumer credit cards at 0.3 per cent.

In the US, rates typically range between 1.15 per cent to 3.3 per cent plus a small flat fee per transaction.

The third RBA reform starting in October will force EFTPOS, Mastercard and Visa to publish the merchant fees they charge so businesses can compare rates and avoid paying higher-than-average fees.

Birmingham said banks are supporting their business customers to prepare for the changes.

"While the RBA estimates that only one in every six businesses choose to apply a card surcharge, it's a practice that Australians will be happy to see the back of," Birmingham said.

"From next month, the price consumers see in the aisle or on the menu will be the price they pay at the checkout. Similarly, when you shop or pay a bill online, you won't be hit with a card surcharge when you enter your payment details."

Council of Small Business Organisations Australia (COSBOA) CEO Skye Cappuccio told SBS News hospitality and tourism businesses with tight margins that also process lots of card transactions will find the extra cost of not surcharging will add up quickly.

"Businesses that feel they have a limited ability to increase prices are highly concerned," said Cappuccio. "We would have preferred to see the interchange fee changes fully rolled out first, so small businesses knew how their payment costs would change before needing to re-cost products and services, update systems and redo business budgets.

"The priority now is making sure they have clear information from providers and that lower payment costs genuinely flow through to the businesses that need them."

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