There is an end in sight for consumers getting hit with sneaky surcharges when they pay on card, with the federal government prepared to ban the practice by 2026, promising to give consumers and small businesses “a fair go”.

However, any changes will not take effect until January 1, 2026, and are subject to further reviews by the Reserve Bank of Australia (RBA).

The pledge follows an estimate from the RBA that Australians have been losing nearly $1 billion in surcharges a year, as Australians increasingly tap and go, but some estimates have that figure as high as $4 billion.

Assistant Treasurer Stephen Jones says change is needed to keep up with the digital economy.

“It might seem like a small charge every time you tap and go, but it punches a big hole in your wallet at the end of the year when you add up all of those fees,” Mr Jones said.

He said less than 12 per cent of retail transactions were now made using cash, but despite payment service providers and banks benefiting from this — because it is expensive to move cash around — the savings were not being passed onto small businesses and customers.

He also pointed to the discrepancy small businesses faced, saying they were sometimes charged twice what Coles and Woolworths were for the same transaction.

“Clearly, there’s excessive charging going on here [and] we want to get to the bottom of it.”

The Australian Banking Association has previously told the ABC that bank fees and charges have been reducing every year across the past decade and there is an option for businesses to use least-cost routing (LCR) so payment terminals automatically default to the cheapest surcharge.

RBA review underway but government sending ‘clear signal’

To crack down on the surcharges, the government has committed $2.1 million to the Australian Competition and Consumer Commission.

The watchdog will be tasked with looking out for illegal and unfair surcharging practices, plus increasing education and compliance activities.

The RBA is currently reviewing merchant card payment costs and surcharging, and Mr Jones says that while the government will await that process to finish, it wants to send a “very clear signal [that] excessive surcharging has to go”.

“We’re sending a signal both to the bank and to the card payment providers that the government is willing to move unless they change their behaviour.”