Card surcharges are annoying and cost Australians billions every year. But Aussie banks have just said the quiet part out-loud: more Aussies would suffer higher charges and fewer rewards if the plan went through.

You’d think the RBA's plan to scrap scrap card surcharges entirely would be met with universal applause. But there’s a catch, and it’s a big one.

Australia’s banking sector has just warned, in the clearest possible terms, that taking away these surcharges will come at a cost, one not paid by merchants, but by you, the everyday cardholder.

And for once, they’re not even trying to sugar-coat it. In their official submission to the RBA, the banks effectively said what most consumers have long suspected: if the government touches the $900 million pot of revenue that comes from interchange fees, the banks will simply find new ways to take it back, and it’ll be coming out of your hip pocket.

What’s being proposed?

The Reserve Bank of Australia (RBA) wants to overhaul how Australians are charged for using their debit and credit cards, and it’s not pulling any punches. After a multi-month review into the way merchants pass on card costs to consumers, the RBA has floated a proposal to abolish all card surcharges, with the goal of making pricing clearer and fairer for consumers.

The proposed reform has three key pillars:

• Scrap surcharges altogether: That 1–2% extra you pay on top of your bill when using a card would be banned.
• Cut interchange fees: These are the often-invisible fees banks charge each other (and ultimately merchants) when a card is used. The RBA wants them lowered even further, despite already being among the lowest in the world.
• Mandate clearer pricing: Payment providers like Square, Stripe and Tyro would need to clearly itemise the fees they charge merchants and allow easier switching between services.

Banks hit back

If the Reserve Bank expected quiet compliance from the finance sector, they’re not getting it. After all, this plan is set to cost them over a billion dollars a year.

The Australian Banking Association (ABA), the powerful lobby group that speaks for Australia’s major banks, issued a blunt response: we support the ban on surcharges, but not the rest of it, and customers will pay more as a result of this legislation passing. ABA CEO Simon Birmingham, who spent years as a federal senator and cabinet minister before taking this new gig, is no stranger to the art of political messaging. But in this case, his warning wasn’t wrapped in regulatory jargon. It was direct: “There is a risk that driving [interchange fees] down further would put further pressure on household budgets through higher card fees, shorter interest-free periods and diminished rewards” .

You read that right: the guy the Australian finance industry trusts to represent them just said, in no uncertain terms, that if the Reserve Bank’s proposal goes ahead, banks will look to recoup the roughly $900 million they make each year from interchange fees by charging you more elsewhere. No euphemisms, no spin, just a clear signal that the pain will be passed on.

Here's how.

Higher card fees

The RBA says scrapping surcharges could save households around $60 a year. But that’s less than what many Australians already pay in annual credit card fees, and banks are now openly warning those fees are likely to rise.

Basic rewards cards often charge $59 to $120 a year, while premium options like Amex Platinum climb beyond $1,400. These fees are visible, lump-sum costs, harder to ignore than a few cents or even a couple of bucks at the checkout. And with interchange revenues under threat, they’re a logical place for banks to claw-back income.

Unlike rewards or interest-free periods, annual fees can be raised quickly and without much fuss. They’re stable, scalable revenue, and banks know it.

Even crappier rewards

Rewards programs have already taken a beating over the past decade. Earn rates have dropped, redemption options have shrunk while becoming more expensive, and the once-glossy perks of premium cards now come with more strings attached than ever.

Now, with interchange fees under pressure, banks are signalling that things will get worse.

Before the pandemic, cards like ANZ Rewards Black or NAB Qantas Rewards Premium offered earn rates of up to 1.5 points per dollar on everyday spend. Today, most sit closer to 0.5–1 point per dollar, with stricter caps and exclusions.

If the RBA slashes interchange further, banks won’t just trim these programs, they’ll gut them. And customers chasing frequent flyer points, cashback offers or shopping credits will see the value of their spend fall even further.

For most Australians, that means spending more to get less, or giving up on rewards altogether.

Lower interest-free periods

Interest-free periods are one of the few real perks left in credit cards, especially for people who pay off their balances on time. They’re also a key marketing tool banks use to attract new customers, particularly with balance transfer offers and “no interest for 55 days” promos.

But they cost money for banks to offer which is typically recouped once someone goes over their spend limit, or doesn't pay a bill on time.

Every extra day a customer isn’t charged interest is a day the bank isn’t making revenue on that debt. That’s manageable when other income streams, like interchange fees, make up the difference. If those streams shrink, something has to give, and interest-free days are an easy target.

The banks haven’t even tried to hide this. In its submission, the ABA specifically warned that the RBA’s plan could lead to “shorter interest-free periods”, a quiet shift that could hit thousands of Australians already struggling with debt .

For customers, even small changes matter. A drop from 55 to 44 days of interest-free credit means less time to manage cash flow or take advantage of zero-cost borrowing. And for people using balance transfers to get ahead, often during tough financial periods, the loss of those windows could make it harder to stay in control.

Just like rewards and fees, this is where the squeeze will be felt. And once it happens, it’s rarely undone.