The Government is banning surcharges for in-store payments.
Commerce and Consumer Affairs Minister Scott Simpson made the announcement on Monday afternoon, saying: “Shoppers will no longer be penalised for their choice of payment method, whether that’s tapping, swiping or using their phone’s digital wallet."
The Government will be introducing the Retail Payment System (Ban on Surcharges) Amendment Bill at the end of this year and it expects the surcharge ban to be in place by May 2026 at the latest.
The ban will apply to most in-store payments made using domestic Mastercard, Visa debit, credit cards and EFTPOS.
When businesses accept payments via things like Mastercard or if someone makes a contactless payment through PayWave, they are charged a merchant service fee.
This fee is usually recovered by businesses through a surcharge or higher product prices that consumers pay for.
Simpson says these are often excessive and in some cases, the retailer doesn’t make it clear what the percentage is.
“New Zealanders are paying up to $150 million in surcharges every year, including excessive surcharges of up to $65 million.
“That’s money that could be saved or spent elsewhere."
The ban does not apply to online payments, foreign-issued cards, prepaid gift or travel cards, or cards from networks like AMEX or UnionPay.
Although EFTPOS doesn't come with transaction fees, some businesses still charge extra for it, Simpson says.
“Including EFTPOS makes it clear that there should be no charges for this payment method.”
Simpson says: "A ban on surcharges means no more surprises for people who currently feel like they’re being charged to use their own hard-earned money. It means they can make a purchase knowing exactly what they’ll pay, and how they’ll pay it.”
Going forward, some retailers may have to change their prices to include the costs that businesses pay to banks for processing card payments while other businesses may decide to absorb the cost.
Interchange fees
The Government’s announcement follows the Commerce Commission’s decision to reduce interchange fees paid by New Zealand businesses in order for them to accept Visa and Mastercard payments.
Issuers of Mastercard and Visa cards - usually banks - receive an interchange fee every time someone uses their card to pay for something. Interchange fees make up about 60% of merchant service fees, according to the Commerce Commission.
“The remaining portion of the merchant service fees include fees that are paid to Mastercard and Visa, and to providers of payment services to businesses,” the Commission says.
According to the Commerce Commission, it costs New Zealand businesses around $1 billion a year to accept Visa and Mastercard payments - these costs are often passed to consumers through surcharges and higher product costs.
“The Commission has determined this cost is too high and has acted to reduce this cost for businesses by around $90 million a year.”
In a statement released on July 17, Commerce Commission Chair Dr John Small says: “This is an important step in our continued work to cut costs for businesses and consumers.”
“Our latest decision builds on the initial fee caps set in 2022, which led to $140 million in annual savings to New Zealand businesses.”
Small says “this decision cuts the cost for businesses accepting payments made through credit cards and foreign-issued cards, which are often the most expensive for businesses to accept”.
“We expect our latest decision to see the average small business save around $500 each year in lower fees. Individual businesses could save more or less, depending on the mix of transactions they accept.
“In making this decision we were careful to balance lower costs for merchants today with keeping incentives for new fintechs to innovate and challenge the big established incumbents. That meant leaving enough money in the system to keep it competitive and safe from fraud and scams over the long term.”
New Zealand isn't the only place that has explored this type of ban. The UK and the European Union have a surcharge ban, and the Reserve Bank of Australia recently reached a preliminary view that it would be in the public interest to remove surcharging on EFTPOS, Mastercard and Visa cards.
15 Comments
Big call. For a majority of retailers, the monthly merchant service fee is a significant operating expense directly linked to their customers use of visa and mastercard.
As they can no longer recoup this cost in the form of surcharging, they will naturally increase prices by 1% - 2% across the board for all customers. Alternatively, we'll end up with a bunch of retailers who simply won't accept credit card payments anymore.
I think the Govt. should have gone after the banks and set interchange to 0%. After all, anyone in the know understands that interchange income funds the loyalty programs that the banks offer. So, you can thank your local dairy owner for funding your airpoints...
Seems like slightly heavy handed regulation, but probably the only option left given the behaviour of the banks and also some retailers.
Isn't this just taking us back to when Visa and Mastercard banned surcharging through their contracts, which lead to retailers either not accepting credit cards, or having higher prices?
I remember this all started when discounts for cash and eftpos turned up. Then it just seemed neater to surcharge transactions that cost more - and this enticed dairies and some cafes to start supporting credit card and contactless where they'd previously been eftpos-only.
I can only imagine we're going back to a world where dairies once again will only accept eftpos.
This is a big stick way to solve the problem, simply cutting the interchange fee and banning surcharging beyond actual costs would've been fine...
Banning surcharging beyond actual costs would be harder to enforce.
I don't mind if shops charge more. I find it clearer to make a decision when I see the cost of the item on the shelf rather than getting to the terminal where a surprise might be waiting, and then if I say let's do EFTPOS they cancel transaction and start again.
100% - the banks will be laughing all the way to the bank...
One possible alternative would have been to cap surcharging at the maximum domestic interchange rate which I believe is 0.8%. That would have incentivised governments to reduce the interchange rate to 0%.
I imagine at this juncture there may actually be political blowback in taking interchange to 0 and killing off all the rewards programmes...
I do love that Visa recently threatened to stop innovating if the interchange fees went too low. Was their latest innovation paywave, back in 2011?
I do feel slightly uncomfortable that my local takeaway (who doesn't charge for credit card) is paying for a portion of my airpoints each month, but I do find paywave on my phone much more convenient than swipe card and pin with Eftpos. Particularly when my Eftpos card is scratched and so terminal can't read it.
Maybe this will get Eftpos to get A into G and start rolling out contactless Eftpos?
Visa and Mastercard are taking the piss. They even leave it up to each bank to brand & market their own Visa and Mastercard cards - have you ever noticed how much the banks advertise their Visa and Mastercard cards. They wouldn't do this without some serious incentives - so would be great if the regulator could unpick the "cosy pillow fight" in the words of Nicola Willis between banks and Visa/Mastercard. The ivory towers of Visa and Mastercard have it way too easy.
On the other hand sometimes, does anyone else wonder if the retailer in question is actually paying as much as the surcharge they are hitting you with? For example once had an occasion with a restaurateur of let’s say certain ethnic persuasion, who about turned when I said cancel that and do it instead on eftpos. It became suddenly instead an administration charge. So in the end he got cash and I took the change without any rounding and have not been back since.
Ok so I have now lost the 'discount' I get for not using such methods.
Do better things, like removing tax on bank interest (when under inflation rate).
Minister Scott Simpson bakes in additional 1-2% inflation for 2026.
Banning surcharges might sound good in theory, but in practice it gives large retailers an unfair advantage. Big chains in NZ can negotiate much lower Visa and Mastercard fees, while small businesses like dairies and cafés get stuck with higher rates. Without the ability to pass on those costs, mum-and-dad shops are forced to absorb them - while the big guys keep their margins. Oh well, maybe now we’ll start to see more merchants offering discounts for cash or Bitcoin. (And for what it’s worth, Bitcoin’s NFC “tap to pay” options don’t really cost anything to accept - the only fees are in converting to NZD.)
Great. But I would go further and make law called "Truth in Pricing" For everything.
"Truth in Pricing"
Where the price you see first is the price you pay.
I just booked into an event, advertised at $20 each. Two tickets with tricky little "booking fees" etc etc via Eventfinda cost me $57.
I maybe would have or maybe would not been happy to pay $57 but $57 should have been what they advertised. It's a rort. And if I had decided $57 was not what I wanted to pay, I would have wasted a chunk of time to find that out.
I'd support this. Feel the same holiday surcharges.
Most retailers are sneaky in how they add the charge so I agree it has to go. But I don't know why it's a charge in the first place, the banks set the high pay wave amount. Does the consumer have to recover all of the banks advertising and promotion getting us to use pay wave
I've seen numerous reports that the paywave charges actually fund the banks loyalty schemes
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