Australia to ban surcharges on payment cards, cut bank fees

SYDNEY, March 31 (Reuters) - Australian consumers will no longer face surcharge fees on card payments after the country's central bank said it would ban the widely disliked practice as inefficient and opaque.

Wrapping up a months-long public review process, the Reserve Bank of Australia (RBA) on Tuesday announced it would remove card surcharging on designated eftpos, Mastercard MA.N and Visa V.N networks from October 1 this year.

The RBA estimated the change would save consumers A$1.6 billion a year, though some banks and businesses have warned they would have to claw back the lost money by other means.

"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 RBA said in a statement.

The RBA also intends to cap interchange fees for credit cards charged by banks at 0.3% of the value of the transaction, down from 0.8% currently. This was estimated to reduce costs for businesses by around A$900 million a year, though it could also hit bank incomes.

American Express AXP.N has a separate agreement with the RBA, though it will be part of a new review starting in mid-2026. This review will consider regulations for mobile wallets, three-party card networks, "buy-now, pay later" services and e-commerce platforms.

In an RBA survey of 3,000 Australian consumers, about three quarters of them viewed surcharging as unnecessary and said it should stop.

However, the Australian Banking Association argued that consumers could now face higher card fees, higher rates and shorter interest-free periods.

"International experience shows that this reduction in interchange will not lower costs for business, it will simply shift more of the fees they pay into the pockets of multinational payments and technology companies," said ABA CEO Simon Birmingham, in a statement.

Reacting to the announcement, the Australian Restaurant & Cafe Association claimed the changes would force businesses to raise menu prices to cover merchant fees.