Australia Bans Card Surcharges, Puts Pressure on Businesses

The Reserve Bank of Australia has decided to ban card surcharges from October 1, affecting businesses that add extra fees when customers pay with debit or credit cards. This change follows a review by the central bank and will apply to all designated card networks, including EFTPOS, Mastercard, Visa, and American Express.

According to the Australian Restaurant and Cafe Association, this is one of the largest changes in payments in Australia's history, and many small businesses are unprepared for its arrival. In 2003, Australians mostly paid in cash, but now cards make up almost three out of four payments, with debit cards being the favourite way to pay.

The change means that businesses will have two options: absorb the remaining cost themselves or build those costs into slightly higher prices. This could result in price increases for customers who currently avoid card surcharges by paying in cash. The Reserve Bank estimates that this could add around 0.1% as a small, one-off impact on measured inflation.

The central bank aims to lower wholesale card payment costs for businesses by about $910 million a year by cutting interchange fees. Large businesses generally have the scale and bargaining power to negotiate lower payment costs, while small businesses typically pay higher rates.