Australians could soon see the end of card surcharges under a major overhaul of the payments system, with the Reserve Bank confirming plans to eliminate fees currently passed on to consumers.

The changes target Visa, Mastercard and Eftpos transactions, with the central bank aiming to remove the extra charges shoppers face when paying by card. At present, consumers pay close to A$1.6 billion each year in surcharges, while businesses incur an additional A$200 million in related costs.

Under the proposed reforms, interchange fees charged to small businesses will be removed, delivering an estimated A$910 million in annual savings. The move is intended to shift the system towards a clearer pricing model where costs are built into the advertised price rather than added at the checkout.

Reserve Bank governor Michele Bullock said the existing rules, introduced in 2009, are no longer effective. She noted that surcharges have become confusing for both shoppers and businesses, with many customers now expecting a simpler system without extra fees.

As part of the changes, interchange fees on debit transactions will be reduced from 16 cents to 8 cents, while credit card fees will fall to 0.3 per cent from 0.8 per cent. Fees on foreign-issued cards will also be capped at 1 per cent for the first time, with further consideration of American Express surcharges expected in 2026.

The reforms are expected to have the greatest impact on small businesses, which often pay higher fees than large retailers. Bigger companies frequently negotiate lower rates and in some cases do not pass on surcharges, although some major chains continue to charge customers.

To improve transparency, the Reserve Bank plans to publish comparison data on merchant fees, allowing businesses to better assess their options when choosing payment providers. The new rules are scheduled to take effect from 1 October.

The central bank said the changes are designed to make payments simpler while ensuring businesses receive better value from the system. It also reiterated its commitment to maintaining access to cash, noting that many Australians still rely on it.

The overhaul comes amid ongoing cost-of-living pressures, with the Reserve Bank acknowledging that inflation remains above its target range. The decision follows more than a year of consultation, during which banks and payment companies raised concerns about reduced revenue for maintaining and upgrading payment infrastructure.

The changes are also likely to affect credit card rewards programs. The Reserve Bank indicated that lower interchange fees could lead providers to scale back benefits or adjust fees, noting that current arrangements often see lower-income users indirectly subsidising premium reward cards.

Further consultation is planned later this year to examine broader issues within the payments sector, including mobile wallets, buy now pay later services and online payment platforms, as regulators look to improve competition, efficiency and security across the system.