From 1 October, an Australian merchant will no longer be allowed to add a fee for paying by card, and the interchange an issuer earns on a domestic consumer credit card will fall from a cap of 0.8% to 0.3%. In the United States, a settlement between Visa, Mastercard and 12 million merchants that received preliminary court approval in June does something close to the reverse: it leaves most interchange where it is, caps only the cheapest tier of consumer credit cards, and hands merchants the card surcharging right by card product and to refuse premium cards altogether.
Two systems looked at the same complaint, that cardholders’ rewards are paid for by everyone else, and chose opposite instruments. The Australian regulator prices the cost into the shelf. The American settlement prices it at the till. What happens to the premium rewards card depends on which of the two you are holding.
Australia removes the card charging price signal
The Reserve Bank’s conclusions, published on 31 March, are unusually candid about why. Surcharging was introduced in 2003 so that consumers would see the cost of a credit card and choose a cheaper way to pay. Two decades later 16% of merchants surcharge, the average surcharge is 1.0% on debit and 1.2% on credit, and only one merchant in twenty charges a different rate for the two. Australians paid about A$1.8bn in surcharges last year. The RBA’s own conclusion was that the framework “is no longer achieving its intended purpose of steering consumers towards making more efficient payment choices.” It had become a fee.
So the bank is removing the surcharge and cutting the thing the surcharge was meant to signal. Consumer credit interchange drops to 0.3%, debit falls from 10 cents or 0.2% to 8 cents or 0.16%, commercial cards keep their 0.8% cap because they compete with Amex, and foreign-issued cards get a new 1.0% ceiling from April 2027. Merchants save about A$910m a year in interchange. Issuers lose about A$660m. The RBA is explicit about where it expects that to come from: “interchange should not be used to fund consumer reward programs.”
Issuers did not wait for October. NAB has cut the earn rate on its Rewards Platinum card to as low as half a point per dollar and raised its purchase rate to 22.49%. Westpac has taken its rates to 23.99% and its Altitude Platinum fee from A$175 to A$250. CBA is discontinuing its Awards card and ending fee waivers from January. ANZ has capped points and cut its Frequent Flyer Black sign-up bonus from 130,000 to 80,000. Visa told the RBA during consultation that a 0.3% cap would make consumer credit portfolios loss-making by about A$313m a year, and Mastercard put the cost to consumers of reduced rewards at A$400m. Neither figure needed to be right for the banks to act as if it were.
Australia has run this experiment once already. The 2003 reforms cut credit interchange from about 0.95% to 0.55%. By 2006 the spend needed to earn a A$100 reward voucher had risen from A$12,400 to A$16,000 and the average annual fee per card account had gone from A$40 to A$70. Rewards survived, at a higher price to the cardholder. That is the outcome the RBA is choosing again, on purpose, with the surcharge ban to make sure the merchant side of the bargain shows up in prices instead of at the terminal.
The US keeps the signal and sharpens it
The American settlement, announced in November and given preliminary approval by Judge Brian Cogan on 9 June, cuts the average effective credit interchange rate by 10 basis points for five years, freezes posted rates at their March 2025 levels for the same period, and caps standard consumer credit cards at 1.25% for eight years. Premium consumer cards and commercial cards are outside the cap. Network fees are outside the settlement entirely.
What merchants get instead of a lower card surcharging price is a set of pricing tools. They can surcharge up to 3%, and they can do it by product, so a Sapphire Reserve can carry a fee that a basic Visa does not. They can accept Visa and Mastercard in three categories, standard consumer, premium consumer and commercial, and decline one without dropping the others. They can surcharge Visa and Mastercard without surcharging Amex, which the old rules effectively prevented. Surcharging itself has been legal in the US since the 2013 settlement, and Visa cut the cap from 4% to 3% in 2023, but the product-level right is new.
The merchants who objected made the obvious point. Stephanie Martz of the National Retail Federation said that “you can’t just suddenly tell more than 80% of your card customers you’re not going to take their cards. You would lose a lot of business.” NACS called it “a bad deal” and has said it will appeal to the Second Circuit if the settlement is approved. Visa’s chief financial officer told analysts to expect implementation in fiscal 2027.
A New York Fed staff paper published last year sets out the economics the tools are aimed at. US card issuers earn interchange of 1.82% of purchase volume on average and spend 1.57% of it on rewards. Eighty-six cents of every interchange dollar comes back to the cardholder, and the cardholder with the $795 Sapphire Reserve or the $895 Amex Platinum gets more of it than the one with a basic card. US merchants paid a record $198bn in swipe fees last year, and Visa and Mastercard both closed at all-time highs on 24 August. A product-level surcharge takes the premium cardholder’s rewards and prints them on the receipt.
Where both card surcharging roads go
The US settlement, if it survives appeal, starts the cycle Australia is finishing. Surcharging is legal but rare in the US today. The product-level right makes it worth doing on the cards that cost the most, and once surcharging spreads it stops steering anyone and becomes a line item, which is exactly the finding that led the RBA to ban it. The European Union capped credit interchange at 0.3% in 2015 and banned surcharges in 2018, and the RBA says its new cap brings Australia “into line with jurisdictions such as Europe and the United Kingdom.”
For an issuer, the two card surcharging regimes produce the same result on a different timetable. In Australia, the premium rewards card is being repriced now: lower earn rates, higher fees, higher purchase rates, and the bank keeps the customer. In the US, the premium card keeps its interchange for at least eight years and the merchant, if it dares, charges the cardholder for it at the till, so the reward survives and its cost becomes visible. The Credit Card Competition Act, which the president endorsed again in August, is the instrument that would change the US timetable, and it is the fight the networks are spending on.
For a merchant, the Australian settlement is cash, about A$910m a year, in exchange for absorbing the card surcharging cost into prices. The US settlement is optionality, and optionality is only worth something to the merchants large enough to use it. For everyone building card products in either market, the rule the Singapore digital banks are learning this year applies: the reward that is funded by interchange is the one that gets cut first.