Surcharges at the till will be banned next year

Monday, 28 July 2025

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Retailers and consumers have welcomed the Government decision to axe surcharges at the till by May next year.

“Surcharges are a hassle and an unwelcome surprise when shoppers get to the till,” said Commerce and Consumer Affairs  Minister  Scott Simpson in announcing the changes.

That “pesky note” on the payment machine will become a thing of the past, he said.

Shoppers paid up to $150 million in surcharges a year, “including excessive surcharges of up to $65m”. That’s money that could be saved or spent elsewhere, Simpson said.

Similar charges were recently banned in Australia.

The change would allow consumers to shop with confidence knowing how much they would pay for their purchases, he said.

The ban follows the Commerce Commission decision to reduce interchange fees paid by businesses to accept Visa and Mastercard payments, which would save businesses $90 million a year.

“By May 2026 at the latest, we will ban surcharges for in-store payments. Shoppers will no longer be penalised for their choice of payment method, whether that’s tapping, swiping or using their phone’s digital wallet.”

Surcharges covered fees businesses pay for accepting contactless payments, but they were often more than the cost incurred and in some cases retailers did not make it clear what the percentage would be added to the purchase price, Simpson said.

Retail NZ Chief Executive Carolyn Young said retail payments were a contentious and complex area for retailers. “We are pleased the Government has listened to our calls for changes in the system.”

The changes meant retailers could no longer add surcharges to debit and credit cards. But they would still be able to add surcharges to online sales, pre-paid and international credit cards.

While removing surcharges from in-store purchases was good for domestic consumers, retailers continue to face costs to accept debit and credit card payments and those costs would probably be added to prices, Young said.

She said a survey last year of Retail NZ members found that only a quarter of respondents applied surcharges. Almost half of retailers calculated a rate that covered their costs, while 39% took advice from their terminal provider or relied on information from their bank statement. About 5% looked at what other retailers are charging.

Retailers said the complexity of the merchant payment system prevented them from fully understanding the charges and fees they paid. These fees include interchange fees, scheme fees, switch fees, other external and internal costs, Young said.

Considerable work would be needed to ensure that terminals had the ability to distinguish between domestic debit and credit cards, and commercial or international credit cards, and charge differential surcharge rates, she said.

The Commerce Commission would also need to ensure the fees charged to merchants reflect the new legislation, and that the savings were passed on to retailers and other fees were not increased, she said.

While larger chain businesses - such as supermarkets or retail giants - are easily able to manage this fee, smaller businesses are increasingly struggling with the added cost, leading them to pass it onto customers.

Dairy and Business Owners Group chairperson Ankit Bansal said the changes to payment surcharge rules unfairly target small retailers instead of addressing the real problem — the banks.

'Both consumers and small retailers are feeling the squeeze from high bank charges,' Bansal said.

Large retailers paid significantly lower banking fees, while small businesses, with no power to negotiate, were left paying inflated rates, he said.

Newmarket Business Association chief executive Mark Knoff-Thomas said anything that improved the customer experience was a move in the right direction, but he wanted to know that there would not be unintended consequences.

The commission needed to continue investigating and understanding the root cause of these surcharges, he said, and to ensure they were fair and reasonable.

Otherwise there was a concern the costs would come back to the consumer.

'What are the banks and credit card companies charging for the privilege of using these services, so the customer isn’t left holding the baby, so to speak,' said Knoff-Thomas.

'This is part of a multi piece puzzle. All the pieces need to be looked at very carefully to make sure the overall outcome is fair across the supply chain,' he said.

Jessica Walker, acting head of research and advocacy at Consumer NZ, said scrapping surcharges would put millions back into the pockets of New Zealanders and make accepting payments much simpler for merchants.

“We’ve received close to 300 complaints about excessive surcharges (over 2%) in the last few years. In some cases, card payment surcharges were as high as 25%. We’ve even had complaints about surcharges being applied to eftpos transactions,” Walker said.

BusinessNZ Director of Advocacy Catherine Beard said consumers should be encouraged to use modern modes of payment 'without second-guessing a purchase or having to do the ‘insert card’ dance at the till'.

'We used to pride ourselves on being early-adopters of new technology, but surcharges felt like a step back for New Zealand,“ she said.

The commission proposed in December that part of the fee be capped, with the commission finding this would save Kiwis behind the counter $260m a year, with the savings passed onto customers.

However, Mastercard has stated the blame for surcharging lay with the businesses, claiming merchants were overcharging customers through these fees.

Shoppers were increasingly saying they would only use contactless payments when there was no surcharge.

Small businesses said banks’ associated fees with providing contactless payment were too much to absorb, and had no choice but to pass them onto customers in the form of a surcharge.

In Christchurch, Coffee Lovers Cafe charges a 1.65% surcharge for paywave, despite getting charged 3% by the bank.

“And people still complain,” worker Olivia Ferris said.

“Once a lady paid with surcharge and then asked for a refund so she could pay with cash.”

Ferris said “for sure” coffee prices and food prices might have to go up, to combat the cost once a ban was in place.

“It’s going to be tough for all the small businesses out there.”

Burger Bonanza manager Nikhil Thakkar said $800 a month for total transaction fees was unaffordable and he made the decision last July to start a 1.5% contactless payment surcharge at his central Christchurch store.

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