The surcharge ban was meant to save us $150m. Here’s why it might not happen
Thursday, 11 December 2025
In the ancient Greek analogy, Diogenes walks through a crowded marketplace carrying a lantern as he searches for “an honest man”.
The search ends in failure, with the point being that an honest man is elusive to the point of perhaps not even existing.
If you were to carry that lantern through the modern marketplace to make a similar point about searching for the unfindable, you could easily replace the search for “the honest man” with the search for a consumer in favour of card payment surcharges.
These pesky percentages added to almost every tap of our credit or debit card are widely reviled – and for good reason.
In the Stuff Money section, we often talk about small contributions compounding over time if invested in the right place. The same principle applies when we pay small, unnecessary charges, sometimes multiple times a day. Imagine how much these incremental charges could contribute to your wealth if diverted elswehere over years.
The thing is that card surcharges – the charge we pay when buying items via tap and go on credit or debit cards – were on track to be banned.
Minister of Commerce and Consumer Affairs Scott Simpson committed earlier this year to banning surcharges outright, with an implementation date set for May 2026.
It seemed like a done deal, but those plans have hit a few speed bumps in recent weeks.
What’s standing in the way?
For the surcharge ban to go into effect, it will need to be voted in by Parliament in the new year. This would require a standard majority among sitting Members of Parliament.
Under normal circumstances, you would expect a coalition Government to pass a Bill into law given they have sufficient seats.
In this case, there are, however, some differences of opinion between coalition partners Act and National on how the surcharge ban should work.
Asked directly this week whether Act would vote for the surcharge ban in its current form (a blanket ban on in-store transactions), ACT Commerce and Consumer Affairs spokesperson Dr Parmjeet Parmar deflected and said the Bill will only have its next reading in the new year.
“In the meantime, the Government has an opportunity to consider the feedback it's received, including from business owners who told the select committee they were concerned about added costs,” she said.
“We don’t want to see new costs on retailers passed on to customers. I have proposed limiting the ban to businesses that don't offer a choice of payments. My proposal strikes the right balance to support business and protect consumers’ interests.”
Parmar told me further conversations continue behind the scenes off the back of a number of proposals to “improve this legislation.”
A spokesperson from NZ First told me the party had noted the concerns raised by businesses and retailers and will work on the issue with its governing partners.
“This is a Government Bill so we will continue our support based on Cabinet decisions,” the spokesperson said.
Former National politician and now chief executive of Auckland Business Chamber Simon Bridges has also leaned into the issue recently, contributing to an effective lobbying effort with Retail NZ to push the interests of retailers and small to medium-sized New Zealand businesses.
“A blanket ban means these businesses either have to suck up the costs themselves or alternatively smear them indiscriminately so that consumers currently using low-cost options like EFTPOS pay more,” Bridges said in recent weeks.
“The bill in its current form will either hurt businesses or consumers in unfair and non-transparent ways.”
In place of a blanket ban, Bridges is calling for a cap on debit cards at 0.5% and 1% on personal domestic credit cards.
Retailers vs consumers
What this is quickly turning into is a confrontation between retailers and consumers.
Simpson tells me “the price on the shelf should be the price at the checkout.”
“The cost of these surcharges to consumers is $150 million a year, with $65 million of that being over and beyond what is a reasonable cost recovery,” Simpson says.
“This decision to ban surcharges is on the back of a decision by the Commerce Commission to reduce Interchange fees (Bank fees) by $90 million on 1 December, on top of the $140 million in savings already banked in 2022. A ban on surcharges would ensure that consumers get the full benefit of these reduced costs.”
The point Simpson makes here is an important one.
From 1 December this year, we saw the introduction of a new cap on interchange fees.
This is simply a small fee that a retailer’s bank will pay your bank every time you swipe or tap your credit or debit card. For instance, every time you swipe to buy a cup of coffee, 2 cents of the retail price will go toward covering the interchange fee.
Under the changes coming into effect, the cap on an interchange fee will drop from 0.8% to 0.3% – a small adjustment that is expected to save retailers in the vicinity of $100 million per annum.
Given that retailers were set to make such huge savings on the back of this change, it was deemed fair to ban surcharging to ensure that something also fed back into the consumer’s pocket.
If the surcharge ban isn’t enforced, this will lead to retailers benefiting from both the reduced interchange fees and the continued ability to surcharge at the checkout.
And this is why consumer groups have been adamant that a surcharge ban is the best way to give something back to consumers.
Follow the money
So much of this comes down to where the money goes (and where it doesn’t).
Consumer NZ communications and campaigns manager Jessica Walker told me this reduction in interchange fees makes it much more affordable for businesses to accept payments, but this doesn’t always translate to savings for you or me.
“We are sceptical about whether consumers will benefit from this,” she says.
“There's a reason for our scepticism. When the Retail Payment System Act was introduced in November 2022, the Commission estimated it would save businesses $105 million a year. In theory, that should have led to lower surcharges for customers. We haven't seen any proof that those savings were passed on.”
The added problem is that there’s a real lack of transparency when it comes to surcharging.
“We used to say that anything over 2% is likely to be an excessive surcharge,” says Walker.
“Now interchange fees are lower, we say surcharges should be about 1%.”
The point underpinning this is that if you haven’t seen a reduction in the surcharges you previously paid since 1 December, then you are likely being charged more than is necessary to cover the cost.
Moneyhub founder Christopher Walsh agrees with Consumer NZ, saying surcharging actually makes it difficult to compare the real cost of an item.
“No surcharging is better for the consumer and the cardholder because it makes pricing comparable,” says Walsh.
“If you just get rid of it, then the cost of the surcharge could be priced into the good so that we know what we’re actually paying.”
At the moment, you might have a situation where some retailers charge 1% and others charge 2%, making it difficult to work out what you’re actually paying and whether you’re getting a decent deal.
Banning surcharges would mean the price on the box is the final price we pay.
The real cost of the surcharge
Consumer NZ senior investigative reporter Chris Schulz estimated that after a year of purchases on his card, he had paid roughly $300 to $400 on surcharges.
Hypothetically, if he had instead put $300 per year into the S&P500 since 2010 (when surcharges first appeared), that money would have been worth approximately $11,600 by the end of 2024 due to compound growth.
This is why these things matter. Every percentage shaved off our savings here or there has the potential to reduce the amount of money we can put in places where it could really make a difference.
Our politicians debate these things furiously because small incremental changes can make a major difference in terms of what ends up in the consumer's pocket or what stays with the retailer.
Whether it’s your KiwiSaver or an annoying surcharge, it’s important to remember that every percentage point can make a difference, whether you notice it immediately or not.