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For Australians who pay for their coffee with a debit card, the small extra they have to pay can end up becoming a significant sum.
The Reserve Bank estimates Australians spend $1 billion more a year just on using debit cards rather than cash.
As Australians grapple with the cost of living crisis, Prime Minister Anthony Albanese says the surcharge must end.
“When people go and see a price increase on the board of the company where they are making a purchase, that should be the purchase price. There should be no hidden fees or surcharges there, when the People use their own money. Keep this in mind: the debit card takes money directly from the account of the people who hold their money, and there should be no additional fees on it.
The debit card surcharge is the extra that businesses must pay to banks for processing card payments.
Reserve Bank data shows that in the last financial year businesses paid around four billion dollars to banks to go cashless.
While some larger businesses can negotiate a discount with their banks, smaller businesses often have to pass on the financial burden to their customers.
The Reserve Bank estimates that if the ban were implemented, Australians could save up to five hundred million dollars a year.
Anna Bligh is the CEO of the Australian Banking Association.
She says the banking sector supports the Prime Minister’s announcement.
“Banks welcome this discussion. The rules are more than 20 years old. The world has changed and it’s time to modernize how we do business across the small business economy.”
Australia is not the only country facing the problem of debit card surcharges.
The Reserve Bank found that Australians pay more in card service fees than Europeans, but less than those in the United States.
In the UK, a ban on credit and debit card surcharges was implemented in 2018, and since then, researchers have found companies and even universities breaking the rules by using legal loopholes.
Wes Lambert is the CEO of the Australian Restaurant and Cafe Association.
According to him, when it comes to banning additional charges for debit cards, the government must take appropriate action.
“What we want to make sure is that the government gets it right, that it doesn’t just ban the surcharges imposed on consumers by restaurants and cafes, but that it doesn’t change the way banks charge merchant fees to these companies and we want to ensure that any surcharge bans are not enforced.” This doesn’t just lead to charging fixed fees to these small businesses.
Reserve Bank data shows that, compared to large businesses, small businesses often have to pay three times higher fees to banks for merchant services, adding to additional financial pressures for small businesses.
Data from the Australian Small and Family Business Ombudsman revealed that around 46 per cent of small businesses did not make a profit in the most recent year of available financial accounts.
A new report from the Council of Small Business Organizations Australia and the Commonwealth Bank also reveals small businesses are struggling with rising operating costs.
Bruce Billson, Australia’s Small Business and Family Enterprise Ombudsman, says the debit card surcharge is not the only issue the government should address.
“There is also the question of whether the Reserve Bank and the Payments Board have the powers they need to not only ensure least cost routing, efficiency and transparency over cards that might be in our wallets, but also where there is no card present, if you are using your phone to make a payment, if you are making an online transaction there is no card present, these are all areas where there is there’s a little pinch, a little cost, a little dip into the customer’s wallet, and the small business traders up “
The Labor government has given $2.1 million to the Australian Competition and Consumer Commission to investigate charges on debit and credit cards.
