Australians could be spared hefty fees when they tap or swipe their cards at the checkout as the Albanese government mulls a ban on debit card surcharges before the next election.

Experts and advocates welcomed an announcement from Prime Minister Anthony Albanese on Tuesday that surcharges could be banned by 2026, subject to review from the Reserve Bank.

But there are warnings that transaction costs could still be passed onto consumers, while others pointed out that millions in credit card surcharges Australians are paying each year will remain.

Consumer group Choice said shoppers are “feeling the pinch” from “sneaky” debit surcharges, which industry estimates suggest cost consumers more than $1.5 billion a year economy wide.

“Surcharges are adding up to significant amounts for consumers across the economy,” Choice head of policy Tom Abourizk said.

“Current card surcharge practices and fees vary wildly, making it harder to know what price people can expect to pay.”

Business cost

Swinburne University professor Steve Worthington said that prior to the RBA allowing surcharges in 2003, card transaction fees were already included in business costs.

That meant consumers still paid through the cost of goods and services, but it was more transparent because consumers were able to choose who to shop with based on prices.

“Let consumers choose who to shop with on the basis of a price that’s clear to all and has no ‘add-ons’,” he said.

Overseas precedents

RMIT University associate professor Angel Zhong said governments in the UK and Europe have already banned some card surcharges.

“Banning debit card surcharges is beneficial for consumers, especially amidst the current cost-of-living crisis,” Zhong said.

“However, it is important to maintain an optimal balance to support businesses, which may otherwise have to bear extra bank costs to maintain payment machines.”

But businesses may introduce other fees to reflect transaction costs, such as new service fees or additional public holiday surcharges, meaning the Australian Competition and Consumer Commission will need to monitor industry closely.

Additionally, Zhong said the Albanese government didn’t include credit cards in the crackdown.

“It is essential for policymakers to consider the implications of credit card surcharges on both consumers and businesses,” Zhong said.

“A comprehensive strategy should be developed to ensure that any future regulations are balanced and fair, preventing undue financial burdens on consumers while also considering the operational costs for businesses.”

Albanese mulls surcharge ban

The Albanese government said on Tuesday it is “prepared to ban” debit card surcharges from January 2026.

They also unveiled $2.1 million in funding for the consumer regulator to crack down on “excessive” surcharging, which is defined as fees that are higher than transaction costs.

Albanese did not firmly commit to a surcharging ban though, instead saying the RBA would conduct a review of payments systems that would consider that, as well as safeguards for small business.

Worthington said this means the “ball remains in the RBA’s court about how and when to introduce the changes”.

The RBA published a consultation paper on Tuesday about its review, saying it is considering a ban on surcharges.

“Preventing merchants from surcharging debit card transactions would help ensure that a surcharge-free electronic payment method is widely available to consumers that is still relatively low cost for merchants,” the RBA’s issues paper said.

“This could help address consumer concerns around the inability to avoid surcharges while maintaining efficient price signalling – at least between debit and credit/charge card transactions – which can help to put downward pressure on card payment costs.”

Digital payments dominant

The review is coming against the backdrop of a growing reliance on digital payments post-Covid, with most Australians now swiping or tapping a card instead of paying with cash.

The RBA said increased demand has driven up card payment costs for merchants to an estimated $6.4 billion in 2022-23, while surcharging has risen from 5 per cent of card transactions pre-Covid to 7 per cent in late 2022.

“Consumers are less able to avoid surcharges, because fewer consumers use or carry cash. The growth of online shopping has also increased the share of transactions where cash cannot be used,” the RBA said.

Zhong explained that growing reliance on digital payments means it’s “crucial” to handle surcharging well to protect the financial wellbeing of consumers.

National Australia Bank said it’s “right to have a conversation” about whether surcharging is “no longer fit for purpose”.

“We welcome the RBA’s review and the government’s plans to reform the payments system for consumers and businesses,” a spokesperson said in a statement.

“We will continue to work closely with the industry to drive the best outcomes for customers and the community.”

Visa, Mastercard, Commonwealth Bank and Westpac were all contacted for comment but did not respond.

ANZ directed inquiries to the Australian Banking Association, which is yet to make a statement.