Australia Bans Card Surcharges; RBA Lowers Interchange Fees to Offset Impact

# What changed and when

# How the RBA adjusted interchange fees To reduce the strain on merchants that lose surcharge revenue, the Reserve Bank of Australia lowered interchange fee caps at the same time it banned surcharges. The main changes are:

• Commercial credit cards: cap remains at 0.8%.
• Foreign-issued cards: a 1% cap will apply beginning April 1, 2027.

The RBA estimates these interchange changes will save businesses about $910 million a year.

# Expected savings and who benefits The RBA projects consumers will save roughly $1.6 billion annually now that surcharges are banned. That is the headline figure, but the distribution of those savings is not automatic. Businesses must decide how to handle higher net acceptance costs now that surcharging is prohibited.

# How merchants and consumers may respond There are three realistic merchant options:

• Absorb the added card acceptance costs and keep prices unchanged.
• Raise prices across the board to cover costs, shifting the burden back to shoppers indirectly.
• Change payment options or encourage lower-cost payment methods.

Ben Danner, Senior Analyst, Debit at Javelin Strategy & Research, noted merchants will need to absorb costs they previously offset with surcharges and predicted smaller merchants may raise item prices if they cannot absorb the costs.

# Potential effects on card rewards and issuer economics Interchange revenue helps fund card issuer programs, including rewards. With lower interchange caps, issuers will have less funding available. That could make it harder for banks and card programs to sustain generous rewards, sign-up bonuses, or other perks funded in part by interchange. The changes do not immediately change commercial credit card caps, which remain at 0.8%.

# What businesses and consumers should check now

• Merchants: confirm with payment service providers that terminal surcharging functions will be disabled by October 1 and model the impact of lower interchange caps on margins and pricing.
• Consumers: expect to see "no surcharge" at point of sale, but monitor prices for potential increases that offset merchant costs. Review credit card rewards and benefits over coming months for changes.

# Short summary Australia's ban removes visible card surcharges at checkout starting October 1, 2026. The RBA offset the policy by cutting interchange fee caps for most consumer card transactions. Projected aggregate savings are substantial, but final outcomes for prices, merchant margins and card rewards will depend on how merchants and issuers respond.