Australia’s card surcharge ban takes effect on October 1, forcing banks and merchants to rethink payment costs while credit card customers face higher fees, weaker rewards and reduced travel insurance benefits.
Businesses will no longer be allowed to add surcharges when customers pay through eftpos, Mastercard or Visa terminals. At the same time, the cap on interchange fees paid by merchants to banks for processing credit card transactions will fall from 0.8% to 0.3%.
The changes are expected to save consumers about A$1.6 bn and businesses another A$200 mn in surcharge fees each year. Lower interchange charges are forecast to cut payments from businesses to banks by around A$910 mn annually.
Several large lenders have increased credit card fees, reduced rewards and removed or narrowed travel insurance included with some cards. Commonwealth Bank has also changed its relationship with the Qantas Frequent Flyer programme while expanding its own Yello rewards system.
For long-standing customers, the economics of premium credit cards are shifting. Rewards, airline points and complimentary insurance have traditionally helped justify annual card fees. Lower interchange revenue leaves banks with less income to fund those benefits.
Travel insurance attached to credit cards is one of the benefits now under pressure. Australian credit cards often package travel insurance with rewards and other premium features.
Customers previously paying annual fees partly for those extras now need to check whether the insurance attached to their card still offers the same scope of cover.
Some banks are reducing travel insurance inclusions as they prepare for lower interchange revenue.
That changes the value of a card even where the annual fee stays unchanged. A customer losing insurance benefits previously included in the card package faces the cost of arranging separate travel cover or accepting narrower protection.
The effect is different from a direct rise in an insurance premium. Banks are changing the bundle of services funded by card revenue.
For insurers underwriting credit card travel programmes, weaker card economics also affect how banks structure group policies and negotiate benefits. Reduced limits, fewer included events or tighter eligibility rules lower the cost of providing insurance within a card product.
The source material does not specify which insurers or individual insurance policies are affected.
The Reserve Bank’s changes leave banks with less interchange income from merchant transactions. Industry analysts expect lenders to recover part of the lost revenue through card fees and changes to rewards programmes. Consumers therefore save on surcharges at checkout but face different costs elsewhere in the payments system.
Roughly one in six Australian businesses currently applies a surcharge. From October 1, those businesses must absorb card acceptance costs or include them in their advertised prices.
Some businesses are considering higher prices. Others are trying to move customers towards bank transfers or account-to-account payments.
The Reserve Bank does not expect the pricing changes to create a continuing inflation effect. Its position is simple: consumers were already paying the cost, either through a separate surcharge or through the underlying price.
Public-sector organisations have less freedom to change prices immediately. Local councils often need consultation and formal approval before increasing fees. One large New South Wales council estimated the surcharge ban would remove about A$400,000 in annual fee revenue.
More than 500 councils across Australia face similar payment-processing changes.
Businesses are also looking at account-to-account payments, which move funds directly between bank accounts without using card networks.
Data cited in the report shows account-to-account transactions represented about 5% of Australian e-commerce payments in 2025 and 3% of payments made in stores.
The surcharge ban gives merchants a stronger financial reason to steer customers towards cheaper payment methods.
October 1 will therefore change more than the amount shown at checkout. Merchants lose the ability to pass card charges directly to customers. Banks lose part of their interchange income. Credit card holders face higher fees, weaker rewards and, in some cases, less travel insurance than before.
A credit card that once included useful travel cover might now offer narrower benefits, leaving the customer to buy separate insurance and changing the real annual cost of holding the card.
