Australians may soon face higher credit card fees and reduced rewards after banks pushed back against the Reserve Bank of Australia’s (RBA) proposal to cut interchange fees.
The RBA announced in July that it plans to scrap card surcharges—saving consumers $1.2 billion a year—and reduce interchange fee caps, which are charged to merchants whenever customers pay by card. The move is expected to save businesses, particularly small enterprises, another $1.2 billion annually.
However, the Australian Banking Association (ABA) warned that lowering interchange caps would prompt banks to raise card fees, shorten interest-free periods, and cut back on rewards programs.
“The RBA’s own data shows interchange fees in Australia are already among the lowest in the world,” ABA chief executive Simon Birmingham said. “Driving them down further risks putting more pressure on household budgets.” He suggested introducing a small business interchange rate instead of overhauling the broader payments system.
The RBA acknowledged that banks could lose between $800 million and $900 million a year under the proposal, which might lead some issuers to increase fees or reduce rewards. However, it stressed that interchange fees would still exceed banks’ costs, meaning any fee hikes would be driven by profit margins.
Despite opposing the fee cuts, banks have backed the RBA’s plan to eliminate surcharges, calling the current system “broken, burdensome, and confusing.”
The RBA is expected to make a final decision on the payment reforms by the end of this year.
