Reserve Bank scraps card surcharges: how shoppers save $1.6b

The Reserve Bank of Australia's abolition of credit card surcharges, effective October 1, brings an end to a deeply unpopular practice that costs consumers up to $1.6 billion a year.

Credit for the change rightly belongs to the consumer groups and individuals who have been lobbying to get the surcharge for using "tap and go" credit or cash card transactions scrapped for years.

Their argument was simple. Consumers were paying more for a service or a good at the checkout or cash register than the actual sticker price. Because the surcharge was usually calculated as a percentage of the total spend this was effectively a stealth GST being imposed by the retailer at the behest of their banking partner.

In short, there was no real price-point transparency.

The era of systemic drip pricing is officially over, replaced by the fundamental principle that the price advertised on the shelf must be the exact price paid at the terminal.

That said the move has been contentious given that the direct cost of providing the tap-and-go service now falls entirely back on retailers. This shift has prompted some frustrated business owners, especially those who are processing hundreds and sometimes many thousands of transactions of less than $20 a day, to refuse to take payment by card.

There is a genuine concern that under the new arrangement cash buyers will end up subsidising card users if merchants raise baseline prices to absorb their new merchant processing fees.

Yet, the businesses rushing to rip up their payment terminals may be suffering from shortsightedness.

There is a distinct irony in businesses such as newsagents, themselves traditional relics of the pre-internet era, reverting to a cash-only model.

Returning to physical currency overlooks the enormous hidden savings of electronic payments.

Merchants no longer have to spend hours of the day trying to find a missing $50, and then schlepping the daily takings to the bank branch. Digital payments also reduce the risk of fraud by light-fingered employees skimming from the register.

Furthermore, the sheer speed of digital transactions accelerates service times. When a customer taps their phone to buy a sandwich, nobody is wasting time taking cash and counting back change. Faster service equals greater productivity, and ultimately yields more profit.

In an increasingly cashless economy, businesses demanding physical currency risk alienating consumers who will simply walk away and take their business elsewhere.

While small businesses wrestle with these operational changes, the federal government has provided a staggering demonstration of hypocrisy.

At the same time these businesses are being forced to absorb transaction costs, the Australian Taxation Office has announced it will no longer accept credit card payments.

Obviously what's good enough for the goose is not good for the gander.

An obvious casualty of the reform will be premium credit card rewards programs. As the Reserve Bank lowers the maximum interchange fees that merchants pay, the revenue pipeline that funds these loyalty schemes is vanishing.

Consumers who aggressively chase frequent-flyer points will find those premium perks heavily diluted, harder to earn, and much more expensive to maintain.

While there will of course be teething problems as merchants adapt, the eradication of card surcharges at point of sale remains a massive victory for consumer fairness.

The new payment system is undoubtedly more fit for purpose in the 21st century than its predecessor.

Be the first to know when news breaks.

Your exclusive preview of David Pope's latest cartoon.

Don't miss updates on news about the Public Service.

Join our weekly poll for Canberra Times readers.

Going out or staying in? Find out what's on.

Grab a quick bite of today's latest news from around the region and the nation.

Catch up on the news of the day and unwind with great reading for your evening.

Today's top stories curated by our news team. Also includes evening update.

Your digital replica of Today's Paper. Ready to read from 5am!

Sharp. Close to the ground. Digging deep. Your weekday morning newsletter on national affairs, politics and more.

Every Saturday and Tuesday, explore destinations deals, tips & travel writing to transport you around the globe.

Your essential national news digest: all the big issues on Wednesday and great reading every Saturday.

Get news, reviews and expert insights every Thursday from CarGuide, ACM's exclusive motoring partner.

Get the latest property and development news here.

Test your skills with interactive crosswords, sudoku & trivia. Fresh daily!

Stay in the know on news that matters to you with twice weekly newsletters from The Senior.

Get the very best journalism from The Canberra Times by signing up to our special reports.

The latest news, results & expert analysis.

Get real, Australia! Let the ACM network's editors and journalists bring you news and views from all over.

We've selected the best reading for your weekend.