Why axing credit card surcharges in shops should increase official inflation

Tuesday, 5 August 2025

The change is more likely to result in a measurable increase in official inflation if it encourages people to stop using fee-free Eftpos cards.

ANALYSIS: United States President Donald Trump may have fired the boss of the Bureau of Labor for publishing jobs data he felt made him look bad, but the Government here can’t be accused of basing decisions on perception.

Well, not when it comes to banning retail outlets from charging a surcharge for credit card transactions, anyway. Other things maybe.

Kiwis have been paying “up to” $150 million a year in card surcharges at the till, according to Commerce Minister Scott Simpson, of which only about $85m has been justified by bank fees. The remainder is profit.

The question no-one will ever be able to answer with certainty is the extent to which retailers will now raise their regular prices in order to compensate for the lost revenue from surcharges.

Lots of factors go into pricing decisions and it won’t be possible to disentangle the impact of removing the surcharges, even down the track.

But banning them will undoubtedly raise regular prices to some extent.

And even if there is a small overall improvement in the cost-of-living, it seems the net effect could only be to increase the consumer price index (CPI).

Commerce and Consumer Affairs Minister Scott Simpson says that in-store charges are like any other 'cost of doing business'. By mid-2026, the Government will ban most credit card and pay wave surcharges.

That’s because Stats NZ confirms card surcharges are not generally included in the basket of goods and services that it monitors to work out the official inflation rate.

“The CPI doesn’t explicitly include credit card surcharges and we don’t collect them as a separate item in the CPI,” a spokesperson said.

“In a small number of cases, we receive some administrative data that may have the surcharges included, but we don’t separate them out.”

Given consumer spending values about $200 billion annually and noting bank fees are being reduced by other measures, there seems a roughly 50/50 chance banning surcharges will result in official inflation being reported 0.1% percentage point higher than it would otherwise be next year.

The chance could be higher if people who are currently paying for items using fee-free Eftpos cards switch to using credit cards once there is no penalty for them doing so.

Not enough to make any minister any lose sleep they are not already losing because of the economy, or get any official fired on this side of Pacific, perhaps.

More of a statistical curiosity and a reminder in a week during which unemployment statistics will at least briefly take centre stage not to get too hung up on all economic data that comes after the decimal point.