Surcharges for payments made by debit card could soon be dumped, but business groups have warned there might be unintended consequences for consumers.
The federal government said it was prepared to ban debit payment surcharges by 2026, pending a review carried out by the Reserve Bank.
The consumer watchdog has also been given $2.1 million to investigate fees for card purchases, which can increase the total cost of goods by several per cent.
Prime Minister Anthony Albanese said while the surcharges may not seem like much by themselves, the fees added up.
Prime Minister Anthony Albanese said surcharges should not apply to debit cards. (Darren England/AAP PHOTOS)
"There shouldn't be hidden charges and surcharges there when people are using their own money," he said in Brisbane on Tuesday.
"A debit card is taking money directly from people's accounts.
"It is their money and there shouldn't be surcharges on it."
But Australian Restaurant and Cafe Association CEO Wes Lambert said removing surcharges altogether could lead to higher costs for consumers in the long run.
For instance, the banks and payment companies could impose a higher flat rate cost on businesses.
"It would lead to higher surcharges and fixed fees that businesses would have to pass on to customers," he told AAP.
"While we fully support lower costs overall for processing debit cards, what we don't want is too many unintended consequences."
Industry groups have called for an overhaul to retail surcharges on debit cards. (Stephanie Flack/AAP PHOTOS)
Consumer group Choice's head of policy Tom Abourizk welcomed the government move to scrap the surcharges.
"The current rules surrounding surcharging aren't working for consumers," he told AAP.
"There's definitely a lack of logic in having a majority of payments that have surcharges tacked on to the advertised price."
Australian Banking Association CEO Anna Bligh believes any changes would be a win for consumers.
"The (Reserve Bank of Australia's) rules allowing retailer surcharging are more than 20 years old," she said.
"They are no longer fit for purpose, given almost 90 per cent of payments are now made digitally.
"Our industry will work with the RBA, the government and retailers through this review process to get a better outcome for Australians."
The business lobby says a ban on debit card surcharges would be a win for businesses and consumers. (Jono Searle/AAP PHOTOS)
Australian Chamber of Commerce and Industry CEO Andrew McKellar said a ban on debit card surcharges would be a win for businesses and consumers.
"In many cases, small businesses are facing these charges," he said on Tuesday.
"It's not necessarily linked to the costs of providing the service.
"In many cases, of course, they've got to pass it through, so it can amount to a significant proportion of the cost in the cost of a good or service that's been provided."
But shadow treasurer Angus Taylor said the move by the government was nothing but a distraction and wouldn't make a dent in broader cost-of-living concerns.
"This is just a band aid on a bullet wound," he said.
"Labor's announcement on surcharging lacks details and won't make a difference at the check out."
Greens senator Sarah Hanson-Young said more needed to be done on the issue.
"We need to make sure it's the bank that covers the cost of this, not the consumer and not the small businesses," she told ABC TV.