It’s one month ’til the credit card surcharge ban kicks in. What you need to do now.
With one month to go before the card surcharge ban kicks in, small business owners need to prepare so that they don’t wind up out of pocket.
From 1 October, businesses will no longer be able to add surcharges to eftpos, Visa or Mastercard payments under new rules introduced by the Reserve Bank of Australia (RBA). The changes are designed to simplify payments and save consumers money at the checkout.
Another consequence for business owners is that the change is also expected to reduce the value of business credit card rewards programs, with some banks already cutting points earn rates, increasing annual fees and withdrawing premium cards.
Key points
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Card surcharges on eftpos, Visa and Mastercard will be banned from 1 October.
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Banks are already cutting credit card rewards as interchange fees fall.
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Businesses may need to rethink how they manage payments and cash flow.
How the change could impact you
Since many businesses use reward points to offset travel costs, staff expenses or other operating costs, the changes could have a noticeable impact. Jane Grant, Chief of B2Bpay, says business owners need to understand how the new payment landscape will affect them.
“The surcharge ban is a meaningful step toward a simpler and fairer payments system, and it is a clear win for consumers.”
She says the changes also alter the way banks fund reward programs.
“It also reshapes the economics that have supported rewards programs for years. For those who rely on these programs, awareness is key. The opportunity to earn has not disappeared, but it is shifting to those who know where to look.”
Why your rewards could take a hit
The RBA is reducing the cap on interchange fees charged on consumer credit cards from 0.8 per cent to 0.3 per cent.
Interchange fees are paid by merchants’ banks to card issuers whenever a customer pays by card. Those fees help fund reward programs such as airline points, cashback offers and other cardholder perks.
According to B2Bpay, the lower fee cap will remove an estimated $660 million in annual revenue from banks, prompting many to scale back their rewards programs. Several major banks have already announced changes, including lower points earn rates, higher annual fees and the withdrawal of some premium cards.
Rethink your payment strategy
If your business relies on credit card rewards, the new rules could make it worth reviewing how you manage business spending before October. Many businesses use reward points to help offset travel, accommodation or other operating costs. With banks already reducing the value of some rewards programs, it’s worth checking whether your current business card still stacks up and whether there are other ways to improve cash flow.
Grant says businesses should start planning now rather than waiting until the changes take effect.
“The opportunity to earn has not disappeared, but it is shifting to those who know where to look.”
Some payment platforms allow businesses to use a credit card for expenses that would normally be paid by bank transfer, such as supplier invoices or tax bills. B2BPay suggests this can help businesses preserve some of the value of their rewards programs while improving cash flow.
Whether that’s the right approach for your business will depend on your fees, card benefits and spending patterns.
Source: Flying Solo
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