The Reserve Bank of Australia (RBA) is advancing plans to reform the national payment system, triggering mounting opposition from the country’s largest financial institutions. At the heart of the dispute is a controversial proposal to eliminate card surcharges — the additional fees frequently applied to transactions made with debit or credit cards.
While consumer groups back the proposal as fairer for everyday Australians, banks argue it could have wide-reaching consequences. From higher annual card fees to reduced loyalty perks, institutions say the cost will ultimately fall back on cardholders — a claim that has divided stakeholders in the financial services sector.
Banks Push Back against Surcharge Removal
The RBA’s plan to prohibit card surcharges, which are commonly added to cover merchant transaction fees, has drawn sharp criticism from Australia’s major banks. In submissions made public this week, the “big four” — ANZ, NAB, Commonwealth Bank, and Westpac — warned that removing surcharges could lead to higher credit card fees, reduced interest-free periods, and a dramatic scaling back of rewards programmes.
Westpac, in particular, accused the government of not being transparent with consumers. “Neither the government nor the RBA have openly and transparently told the 17 million Australians who have a card in their wallet that the proposal… would result in arguably the biggest change in the market since [credit cards’] introduction,” the bank said in its submission.
The RBA, however, maintains that the current system disadvantages low-cost debit card users, who often pay the same surcharge rates as premium credit card holders. Consumer group Choice supports the reforms, arguing they will stop ordinary Australians from subsidising high-end rewards schemes.
According to Morgan Campbell, head of policy at Choice, “There are a lot of stakeholders who make a buck out of the payments system and I’m not surprised to see some of them trying to preserve their position, but ultimately the RBA has to stick to its guns,”
Credit Card Relevance under Threat as Usage Declines
The debate comes at a time when Australians are already moving away from credit cards. According to the RBA, there are four times more debit accounts than credit accounts, and monthly spending on debit cards has consistently outpaced credit card use since 2018.
Research from comparison site Finder indicates that fewer than a third of Australians rely on credit cards for everyday spending. Most people now keep them for emergency purchases or to accumulate rewards — perks that could be sharply reduced if banks respond to the surcharge ban by cutting costs elsewhere.
Steve Hui, a rewards expert and founder of The Flights Club, questioned the future value of credit cards. “If credit cards and debit cards offer … no reward benefits, then really what is the point of getting the credit card?” he said.
Even among industry players, such as Block, the parent company of Square and Afterpay, there is acknowledgment that higher credit card costs may be an “intended outcome” of the reform. Yet analysts like Angel Zhong, finance professor at RMIT University, believe banks could simply shift costs across other financial products, leaving consumers to absorb them regardless. The RBA has confirmed it is listening to concerns and will consult further before making a final decision in December.
