Debit Card Surcharges May Be Banned By 2026

Doctore1003

Doctore1003

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There's an interesting article in the AFR today about some crazy credit card surcharging practices.

Live Payments, which leases payment terminals to small businesses, is incentivizing those businesses to cop a very high 2.6% processing fee in exchange for earning 1 Qantas Point per $1 processed. That fee can be passed on in full to customers under current regulations, which means the business can earn Qantas Points for free, essentially - and some are doing just that.

www.afr.com

Businesses pass on higher fees to customers for Qantas points

Consumers are being hit with far higher debit and credit card surcharges than needed, while small businesses rack up frequent flyer points.
www.afr.com www.afr.com

The article mentions the RBA has brought forward its regular review of payment system regulations, with a discussion paper likely being released this week.

Other than surcharges, the RBA may look at interchange fees (which are the fees card issuers charge merchants; these help pay for the points cardholders earn).

Last time (in 2021) the RBA said:

"The Board's long-held view is that interchange fees should generally be as low as possible, especially in mature payments systems. At present, the Board does not see a strong case for significant reforms to the interchange regulations. The current interchange settings have been in effect for only 4 years and appear to be working well. In particular, the Board does not currently see a strong public policy case for lowering the weighted-average benchmarks or the credit card cap.

Given the massive increase in card payments in Australia, I suspect we'll see the RBA drive down interchange fees even further over time, meaning we'll earn fewer points on credit card spend and see even lower card sign-up offers.

Will the RBA take a step in that direction this year? We shall see!
 
They really need to find a way of driving down merchant fees overall. Interchange fees are only one component of that.
 
Didn't something like this happen in USA lately, and a lot of points cards and good promos went away? I'm not entirely sure, if someone knows feel free to chime in.

However in general, the value of points per transaction has declined a lot over time. I have only been earning points for the last 5 years or so, and just as I was getting started, CC providers were changing earning 3 or so points per dollar to 1/1.5, and now most cards are even less than 1 even for their most premium cards, or have weird differences in how much the earn rates are for many different kinds of transactions.

So we may be truly living in the twilight of points cards. However loyalty programs are very profitable, I feel like airlines will find new ways to peddle points.
 
There is an end in sight for consumers getting hit with sneaky surcharges when they pay on card, with the federal government prepared to ban the practice by 2026, promising to give consumers and small businesses "a fair go."

However, any changes will not take effect until January 1, 2026 and are subject to further reviews by the Reserve Bank of Australia (RBA).
Click to expand...

www.abc.net.au

Debit card surcharges to be scrapped by 2026, government promises

There is an end in sight for consumers getting hit with sneaky surcharges when they pay on card, with the federal government prepared to ban the practice by 2026, promising to give consumers and small businesses "a fair go."
www.abc.net.au www.abc.net.au
 
This strikes me as potentially quite significant for the points space in Australia.

It is going to put pressure on points issuers to justify the surcharges that credit card transactions will attract if debit cards become fee free.
 
levelnine said:
This strikes me as potentially quite significant for the points space in Australia.

It is going to put pressure on points issuers to justify the surcharges that credit card transactions will attract if debit cards become fee free.
Click to expand...

Agree

Surcharges will be lowered as will points earn :(
 
NoName said:
Won’t surcharges just be incorporated into the advertised price? Which of course is how it should be. Every other business cost is included in the price.
Click to expand...
Prices will presumably go up to incorporate the surcharge from debit card fees, but there will still be additional surcharges for credit cards.
 
Cash has high costs of acceptance which are an excepted business cost. Honestly, for most businesses the 1% or so would be much easier and cheaper than managing cash, change, security and depositing cash.
 
levelnine said:
Prices will presumably go up to incorporate the surcharge from debit card fees, but there will still be additional surcharges for credit cards.
Click to expand...

Surely this will just be a first step though? CC surcharges will also presumably be banned at some point after this.
 
If debit cards are broken out, then the blended remainder will likely increase.
So I'd suspect that surcharges will rise.

This might prompt some shift in behaviour - eg. People using debit over credit.
 
It will impact my paying habits. I resent the 1.5% charge to tap and go.
What other developed nation charges to use a credit card? I cannot think of any, but am sure there must be some.
 
For those interested, the discussion/green paper has now been released by the RBA:
www.rba.gov.au

Contents | Merchant Card Payment Costs and Surcharging – Issues Paper

Merchant Card Payment Costs and Surcharging – Issues Paper
www.rba.gov.au www.rba.gov.au
There's a lot in it...
Post automatically merged:

For those interested, the discussion/green paper has now been released by the RBA:
www.rba.gov.au

Contents | Merchant Card Payment Costs and Surcharging – Issues Paper

Merchant Card Payment Costs and Surcharging – Issues Paper
www.rba.gov.au www.rba.gov.au
There's a lot in it...
 
muppet said:
Cash has high costs of acceptance which are an excepted business cost. Honestly, for most businesses the 1% or so would be much easier and cheaper than managing cash, change, security and depositing cash.
Click to expand...
Surcharge - how to raise prices without raising prices.
 
Potentially as a side effect, gov revenue may increase as a result. I believe many businesses are charging the debit card fee to subtly encourage the purchaser to use cash resulting in no electronic record of sale so they can “forget” to include in their annual tax return.
 
Having a look through, of particular interest is page 9 where it lists some of the current issues with the surcharging rules at the moment, the ones that jumped out to me were, 'stealth' charging, excessive charging, and additional services being bundled into the charge:
  • Consumers sometimes do not know whether a surcharge will be applied, or how much it will be. This may be because some merchants do not disclose their surcharge rates as they are required to.
  • Some merchants may be charging excessive surcharges.
  • PSPs are increasingly bundling a range of services with their card acceptance services
There's other issues listed in the paper as well.
Pages 19/20 list several potential remedies, some quite complex, and their various pros and cons:
  • Banning surcharges on debit transactions.
  • Banning card surcharges more broadly.
  • Capping surcharges.
  • Tightening the definition of the cost of acceptance.
  • Mandating differentiated pricing for transactions processed across different networks.
  • Mandating monitoring of surcharging by networks and aquirers.
The meat of the paper is only about 20 pages long, though there's extensive additional background material included as well such as a detailed description (complete with diagrams) of how all the various interchange and scheme fees work.
 
lovestotravel said:
Interesting

Click to expand...
I suspect this might use PayTo, which will basically set up a bank transfer on the spot for you, leveraging your existing mobile banking app to just approve the transaction. Webjet actually already offers this online. I can't really imagine most people wanting to use a QR rather than just tap to pay, but it's good to have more fee-free choices nonetheless.

I wouldn't be surprised if Qantas, which already offers Osko/PayID payments through Azupay, begins to offer Pay by Bank payments soon too.
 
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