Australia's major airlines, Qantas and Virgin Australia, are defending their use of credit card surcharges, warning that prices could rise if the fees are eliminated. The debate comes as the Reserve Bank of Australia considers whether to recommend a ban on surcharges to the government. Airlines argue that allowing businesses to recover the cost of accepting card payments helps keep prices stable, while consumer groups and banks push for a ban to simplify the system and protect consumers from excessive fees.
Australia's major airlines, Qantas and Virgin Australia, have defended their use of credit card surcharges, warning that prices could rise if the controversial fees are scrapped. This comes as the Reserve Bank of Australia (RBA) considers whether to recommend to the government that it ban surcharges or implement other changes to these fees. The debate has intensified as the number of Australians using cash declines.
Currently, businesses are allowed to impose surcharges, which are fees paid by consumers for using card payment systems. The amount charged must not exceed the cost to the business of processing that payment type, typically ranging from 0.5% to 1% for Visa and Mastercard debit cards. The government has indicated its willingness to ban debit card surcharges by January 1, 2026, subject to the RBA's review, expected later this year, and protections for small businesses and customers. Both Qantas and Virgin Australia argue that allowing businesses to recover the cost of accepting card payments helps keep prices in check. In the current inflationary environment, many merchants are facing increased costs, and removing the ability to surcharge may lead to a proportional increase in the price of goods and services, Qantas stated in its submission. Virgin Australia echoed this sentiment, saying that if the ability to pass on card payment fees is removed, the cost of card acceptance may be passed on to all consumers as higher prices. While both airlines offer the option to pay without a fee, using cards can add $50 or more to the price of expensive international return flights, or a smaller amount for cheaper routes and seats. Virgin Australia points out that many customers prefer to pay with credit cards to access additional benefits like loyalty points, insurance, and fraud and purchase protections. However, the country's largest bank, Commonwealth Bank of Australia (CBA), advocates for a complete ban on surcharges, arguing that it's the simplest solution for consumers, aligning with practices in regions like the European Union. This would eliminate excessive surcharging and the challenges of enforcing current standards, CBA suggests. As a fallback, CBA proposes capping credit card fees if the government chooses to only ban debit card surcharges. Mastercard, the payments company, supports a complete ban on surcharges across all card types. A debit-only ban will only increase credit card surcharges, said Rich Wormald, president of Mastercard's Australasian division. The Australian Competition and Consumer Commission (ACCC) also weighed in, stating that between January 2023 and June 2024, it received around 2,500 reports concerning payment surcharging and other add-on costs. The most frequent issue was excessive surcharging, primarily reported against small businesses such as restaurants and cafes. The ACCC further warned that the retail payments system appears to be shifting the greatest costs onto small businesses and consumers, who often have the least bargaining power. It called for greater transparency regarding fees set by card schemes and payment service providers.
CREDIT CARD SURCHARGES AIRLINES AUSTRALIA RESERVE BANK OF AUSTRALIA CONSUMER RIGHTS INFLATION BUSINESS COSTS
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