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Following in the footsteps of its close neighbour Australia, New Zealand will scrap surcharges on in-store card payments as part of a complete overhaul of card fees.
The announcement is the latest in a series of developments aimed at reducing the cost to New Zealand consumers of using cards to make payments.
A Commerce Commission consultation paper on the retail payment system published in December 2024 outlined a range of options short of an outright ban for dealing with high surcharges.
These included imposing a maximum surcharge rate and introducing a requirement to display average merchant service fees.
The government’s decision to opt for a total ban on surcharging follows the Commerce Commission’s decision to reduce the interchange fees businesses pay to accept Visa and Mastercard transactions.
That change is expected to save businesses around NZD65m ($39m) a year.
Commerce and consumer affairs minister Scott Simpson said the government is banning surcharges so that consumers can shop with confidence knowing how much they will pay for their purchases.
“Surcharges are a hassle and an unwelcome surprise when shoppers get to the till. That pesky note or sticker on the payment machine will become a thing of the past,” he said.
“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.”
Excessive surcharges
In its December 2024 consultation paper, New Zealand’s Commerce Commission highlighted the problem of excessive surcharging.
At the time, it said the reduction in interchange fees was expected to bring surcharges down.
Outlining the government’s latest plans, Simpson said surcharges for in-store payments would be banned by May 2026 at the latest, meaning shoppers would no longer be penalised for their choice of payment method.
“Surcharges cover the fees businesses pay for accepting contactless payments and credit cards, but we know these are often excessive,” he said.
“In some cases, the retailer doesn’t even make it clear what the percentage is. 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.”
A practice in retreat
Card surcharging seems to be in retreat around the world, having been banned in the UK and EU since 2018 under the second Payment Services Directive (PSD2).
Earlier this month, as covered by Vixio, the Reserve Bank of Australia, (RBA) opened a consultation into card surcharging, which it says is no longer achieving its intended purpose of guiding consumers towards efficient payment choices.
Along with the Payments System Board, the RBA said that it would be in the public interest to remove surcharging on eftpos, Mastercard and Visa card transactions.
Australian consumers currently pay around A$1.2bn ($788m) in card surcharges each year.
Card surcharges are legal in the US, but with restrictions. However, 10 states – California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas – prohibit the practice outright.
New Zealand’s decision to ban surcharging will see the country move into alignment with those jurisdictions that have already outlawed the practice, and should simplify transactions for consumers at the point of sale.
However, it will create a challenge for the country’s merchants, who face having to absorb the cost of accepting card payments.
Some European merchants argue that the ban has not improved competition as intended. The debate is likely to continue in New Zealand even after the government’s plans take effect.
