Australia's Interchange Overhaul: What the New Credit and Debit Card Fees Mean for Issuers, Acquirers and Merchants
- 6 days ago
- 7 min read
TL;DR: Australia’s interchange framework changes on 1 October 2026, alongside the ban on surcharging Visa, Mastercard and eftpos debit, prepaid and credit cards. The domestic consumer credit interchange cap falls to 0.3%, the debit and prepaid cap becomes 8 cents per transaction, and the commercial credit cap remains 0.8%. From 1 April 2027, foreign-issued card interchange will be capped at 1.0%. The result is structural: issuers must rebuild rewards and card economics, while acquirers, ISOs and Payfacs face margin pressure and greater merchant scrutiny. Merchants should benefit from lower card acceptance costs , but only if savings are passed through transparently.
What interchange changes are coming in Australia?
Australia’s interchange reform reduces the amount acquirers pay card issuers for many domestic card transactions and removes the ability to surcharge designated cards.
The roadmap was set out in the RBA’s Review of Merchant Card Payment Costs and Surcharging Conclusions Paper, published on 31 March 2026.
The key changes are:
Card type | New interchange setting | Effective date |
Domestic consumer credit | Cap of 0.3% | 1 October 2026 |
Domestic debit and prepaid | Cap of 8 cents or 0.16% | 1 October 2026 |
Domestic commercial credit | Cap remains 0.8% | 1 October 2026 |
Foreign-issued cards | Cap of 1.0% | 1 April 2027 |
The credit benchmark will be abolished. The debit benchmark will remain at 8 cents.
At the same time, merchants will no longer be able to add surcharges to payments made through the designated Visa, Mastercard and eftpos networks. The RBA says the package should reduce payment costs and improve competition, particularly for smaller businesses.
The RBA’s media release describes the reform as a package of lower interchange, surcharge removal and greater transparency.
When do the new interchange caps take effect?
The domestic changes take effect on 1 October 2026. The foreign-issued card cap and further transparency requirements take effect on 1 April 2027.
The October package includes:
the 0.3% domestic consumer credit cap;
the 8-cent domestic debit and prepaid cap;
the continued 0.8% commercial credit cap;
the removal of the consumer credit interchange benchmark;
the removal of surcharges on designated card networks; and
initial measures to improve visibility over payment costs.
From April 2027, foreign-issued debit, prepaid and credit card transactions acquired in Australia will be subject to a uniform 1.0% interchange cap. Further transparency measures are also expected to make scheme and payment provider fees easier to compare.
For payments companies, the dates should be treated as implementation deadlines rather than planning milestones. Pricing, settlement, reporting, routing and merchant communications need to be ready before the rules change.
Why is the 0.3% credit cap a big deal?
The 0.3% credit card interchange cap changes the economics of Australian credit card issuing because rewards have historically been funded partly through interchange revenue.
Under the existing framework, domestic consumer credit interchange could reach 0.8% for individual fee categories, with a 0.5% weighted-average benchmark. The new regime removes the benchmark and applies a much lower hard cap of 0.3%.
The RBA’s position is that eligible issuer costs , such as authorisation, processing, fraud prevention, net scheme fees and disputes , are materially below the old settings. It also argues that interchange should not be used to make merchants fund benefits that primarily accrue to cardholders, including loyalty rewards and interest-free periods.
This will affect premium cards most heavily. A card that earns frequent flyer points, cashback or premium benefits must now be funded through a different combination of:
annual fees;
interest income;
foreign exchange and other account fees;
customer acquisition economics; or
a lower cost rewards proposition.
The change also reduces cross-subsidisation. Where merchants blend their costs across payment types, debit users and cash-paying customers can indirectly fund higher-cost credit card rewards.
What about the 8-cent debit cap , isn’t that an increase?
Yes, the final 8-cent debit card interchange cap is higher than the 6-cent setting discussed during consultation and often quoted in early coverage.
The important nuance is that 6 cents was broadly associated with the observed average debit interchange rate and the RBA’s consultation proposal. The formal existing weighted-average benchmark was 8 cents, while the old individual cap was 10 cents or 0.2%.
The final decision therefore:
reduces the individual cap from 10 cents to 8 cents;
retains the 8-cent weighted-average benchmark; and
keeps the option for single-network debit cards.
This is a deliberate compromise. The RBA identified that debit interchange was averaging around 6 cents, but revised issuer cost data suggested eligible debit costs were closer to 7 cents per transaction. Debit issuers also have fewer ways to recover lost revenue than credit issuers because debit cards do not generate interest income.
The result lowers the upper limit paid by smaller merchants while avoiding a sharper reduction that could weaken competition among smaller and customer-owned issuers.
The ABC’s coverage reported that COBA welcomed this moderation, arguing that the 8-cent outcome better recognises the economics of customer-owned banks.
This matters because debit represents approximately 75% of Australian card payments, according to Australian Payments Plus. Even a small per-transaction change affects a large part of the payments ecosystem.
What happens with foreign cards in 2027?
From 1 April 2027, interchange on foreign-issued cards acquired in Australia will be capped at 1.0% of the transaction value.
Foreign cards account for only around 3% of total card transactions, but the RBA found they represent about 20% of interchange paid by Australian acquirers. That makes them disproportionately expensive, particularly for merchants on blended pricing plans.
The 1.0% cap applies uniformly across:
foreign-issued credit cards;
foreign-issued debit cards;
foreign-issued prepaid cards;
card-present transactions; and
card-not-present transactions.
The RBA chose a single cap to reduce complexity and limit circumvention. This is relevant to online travel platforms, virtual cards, AI-enabled commerce and wallet-as-issuer models, where a domestic payment can potentially be substituted with a foreign-issued virtual card.
For merchants with significant international or tourism exposure, the reform should reduce acceptance costs. However, the benefit will depend on how acquirers restructure pricing and whether scheme fees or other components rise.
How are banks responding to the interchange cuts?
Banks are already repricing cards ahead of the October changes.
As reported by Nine News, St George is increasing the Amplify Qantas Platinum interest rate from 20.99% to 23.99%, lifting the annual fee from $75 to $125 and reducing the interest-free period by 10 days.
Westpac is increasing rates and fees on some cards. NAB is lifting card interest rates by 1.5%. Commonwealth Bank is reshaping its Awards proposition through CommBank Yello.
These moves are consistent with the underlying economics. Nine News estimates that banks could lose approximately $600 million a year from the reform package.
The likely direction of travel through 2026 and 2027 is clear: higher annual fees, higher interest rates, reduced earn rates, narrower redemption options and more segmented rewards propositions.
What does this mean for rewards programs?
Card rewards are not disappearing, but the funding model is being rebuilt.
Premium rewards cards will need a clearer user-pays structure. Issuers may retain generous benefits for customers who pay higher annual fees, while reducing rewards for lower-fee products.
For issuers, the key question is not simply how many points a customer earns. It is whether each customer segment remains profitable after accounting for:
reduced interchange;
rewards liability;
fraud and dispute costs;
funding costs;
scheme fees;
mobile wallet costs; and
servicing and acquisition expenses.
For consumers, the value of a card will increasingly depend on total economics rather than headline points. For payments companies, rewards-funded card portfolios will need more disciplined customer segmentation and product pricing.
What should issuers, acquirers, ISOs, Payfacs and merchants do now?
Issuers should model every card portfolio under the 0.3% credit cap. Review rewards earn rates, annual fees, interest-free periods, credit policy and customer profitability before October.
Acquirers, ISOs and Payfacs should prepare for margin compression. Interchange savings will be visible to merchants, creating pressure to explain pricing clearly and demonstrate value through authorisation performance, fraud tools, routing, reporting and service quality.
Merchants should not assume lower regulated interchange automatically means lower merchant service fees. Request an updated fee schedule, identify the interchange and scheme components, and check whether savings are passed through after 1 October.
Merchants should also:
remove surcharge logic from terminals, gateways and online checkout flows;
review blended versus interchange-plus pricing;
assess debit routing and single-network debit options;
model the loss of surcharge revenue in total pricing;
review foreign-card costs before April 2027; and
compare providers using the new transparency information.
Only around 16% of businesses currently surcharge, but those businesses face an immediate pricing change. The cost may need to be absorbed, built into general prices or reduced through better acquiring terms.
For businesses reviewing their payment strategy, RivaTech Consulting’s solutions team can help assess pricing, routing, acquiring and payments operating models.
What comes after this reform?
The interchange changes are not the end of Australia’s payments review. They are the foundation for the next phase.
The RBA’s roadmap includes consultation on mobile wallets, three-party card networks such as American Express, buy now, pay later services and e-commerce platforms. These areas sit outside parts of the traditional four-party interchange model, but they increasingly influence merchant costs and customer choice.
Tokenisation is also part of the wider opportunity. The RBA has previously pointed to a potential $24 billion opportunity for the Australian economy from broader tokenisation adoption. Tokenised payments, digital wallets and AI-enabled commerce may improve security and convenience, but they can also change who controls the customer relationship and who captures payment economics.
The strategic lesson is straightforward: payment cost regulation is moving from a narrow focus on card interchange towards the full payment value chain.
For issuers, the challenge is rebuilding sustainable card products. For acquirers and Payfacs, it is proving value in a more transparent market. For merchants, it is using the new information to negotiate better outcomes.
Australia’s interchange reform is therefore more than a fee change. It is a reset of the incentives underpinning card payments.
Frequently asked questions
What is the new credit card interchange cap in Australia?
From 1 October 2026, the domestic consumer credit card interchange cap will be 0.3% of the transaction value. The existing consumer credit benchmark will be abolished.
What is the new debit card interchange fee?
From 1 October 2026, domestic debit and prepaid interchange will be capped at 8 cents per transaction or 0.16% on an ad-valorem basis. The 8-cent weighted-average benchmark will remain.
Will commercial credit card interchange change?
The domestic commercial credit card cap will remain at 0.8% from 1 October 2026. The commercial credit benchmark will be abolished.
When will foreign card interchange be capped?
Interchange on foreign-issued cards acquired in Australia will be capped at 1.0% from 1 April 2027.
Will merchants automatically pay less for card acceptance?
Not necessarily. Lower interchange should reduce merchant service fees, but scheme fees and acquirer margins are not automatically reduced. Merchants should review pricing and confirm that savings are passed through.
Will credit card rewards disappear?
No. However, rewards are likely to be repriced through higher annual fees, lower earn rates, reduced benefits or more targeted product offers.