‘Screwed’: Consumers to wear cost of RBA card surcharge ban but central bank insists it won’t be inflationary

Shoppers celebrating the end of surcharge fees on card payments have been warned they’ll end up covering the cost anyway, when retailers are forced to build-in the charge.

In a consultation paper on Tuesday, the Reserve Bank of Australia proposed the removal of fees on EFTPOS, Mastercard and Visa transactions, with expectations it would save $1.2 billion annually or an average of $60 per person.

The RBA first allowed businesses to start applying a surcharge in 2003 to encourage consumers to use lower-cost payment methods at a time of growth in the higher-cost credit card market.

But RBA governor Michele Bullock said it was now becoming increasingly difficult to avoid surcharges as consumers embraced card and digital payment methods over cash.

Representatives from the hospitality sector slammed the proposed blanket ban, describing it as another blow to businesses already buckling under the weight of skyrocketing operating costs like wages, rent, energy and insurance.

Australian Restaurant and Cafe Association chief executive Wes Lambert said while he appreciated the RBA was working to reduce merchant fees, its proposal added to small businesses’ expenses.

“(Businesses) who have always passed on the merchant fee directly to consumers, so therefore never had a merchant fee expense on their (income statement), will either be forced to absorb those new merchant fees . . . or they’ll have to pass those additional expenses that they’ve never had before onto their consumers in the form of increased menu prices,” he said.

“Consumers will end up getting screwed . . . consumers will pay more than $1.2b in increased menu prices.

“The RBA is sounding like a used-car salesman (by) trying to sell us a piece of junk as a brand new car.”

By including credit cards, the central bank’s proposal goes further than Treasurer Jim Chalmers’ plan to ban fees on debit card transactions from the start of 2026.

Council of Small Business Organisations Australia chair Matthew Addison described the RBA’s claim of $1.2b in consumer savings as a “mirage”.

“Removing surcharges doesn’t remove all the cost, it simply hides it,” he said.

“The reality is that these fees will still be paid, just not disclosed. That cost will be baked into the price of coffee, groceries, and services across the country.”

But the RBA in its paper claimed the proposed reforms would not be inflationary, with the aggregate impact on consumer prices expected to be about 0.1 percentage points.

AMP economist My Bui also doesn’t expect the removal of surcharges to “play out in the inflation data”.

“If the cost to do business, in terms of using card or cash, is baked into the price then theoretically, it shouldn’t change anything,” she said.

Mr Lambert said customers who pay with cash would be “the biggest loser”.

“Because they never had to pay a merchant fee and now they will have to pay an increased menu price,” he said.

In its consultation paper the RBA claims lowering interchange fees — the wholesale fees a merchant’s bank pays to a cardholder’s bank — would help cover the $1.2b shortfall suffered by businesses.

The central bank claimed these fees were too high and the proposed changes would leave around 90 per cent of businesses better off.

Commonwealth Bank, Westpac and ANZ all declined to comment and instead directed questions be passed onto the Australian Banking Association.

A National Australia Bank spokeswoman said as the country’s biggest business bank, it knew how important it was to support firms and consumers through changes that enhanced competition, transparency, efficiency and consistency.

She said NAB looked forward to the ongoing conversation with the Government and industry over the coming weeks.

The announcement triggered a 2.7 per cent drop in payments provider Tyro’s share price to 90¢.

The company provides payment machines used by many retailers and hospitality businesses nationally.

In a statement to the market, Tyro chief Jon Davey said it welcomed the RBA’s proposal, which aimed to increase transparency and lower card costs for consumers and merchants.

“The RBA’s proposal supports a holistic view of payments reform that benefits small businesses,” he said.