The Government is planning to ban merchants from adding surcharges to most in-store card payments.

The change will save shoppers, but cost merchants, who will need to absorb the cost of offering contactless payments or pass it onto customers by hiking prices.

The change is expected to be made by May next year.

It will apply to payments made in-store using Eftpos, Visa and Mastercard but won’t apply to purchases made online or with foreign-issued cards, prepaid gift or travel cards, and cards issued by networks like American Express or UnionPay.

Commerce and Consumer Affairs Minister Scott Simpson said: “Surcharges are a hassle and an unwelcome surprise when shoppers get to the till.

“That pesky note or sticker on the payment machine will become a thing of the past.

“We’re banning surcharges so consumers can shop with confidence knowing how much they will pay for their purchases.

“New Zealanders are paying up to $150 million in surcharges every year, including excessive surcharges of up to $65m. That’s money that could be saved or spent elsewhere.”

Simpson recognised the surcharges applied by merchants could be excessive and opaque.

“In some cases, the retailer doesn’t even make it clear what the percentage is,” he said.

He noted the surcharge ban would come in addition to the Commerce Commission reducing the interchange fees paid by businesses to accept Visa and Mastercard payments.

These make up about 60% of the service fees merchants pay. The recently announced change is expected to save businesses about $90m a year.

Simpson also expected the Commerce Commission to require banks to improve the way they provide payment cost information to businesses to help them negotiate better deals.

Legislative change will be required to enforce the surcharge ban.

The Retail Payment System (Ban on Surcharges) Amendment Bill is expected to be introduced by the end of this year.

In the United Kingdom and across the European Union, surcharges for debit and credit cards for designated schemes are banned.

Australia currently has surcharging on debit and credit cards, but this must be no more than the cost to retailers of accepting these cards.

The Reserve Bank of Australia has recently proposed banning surcharges altogether for Eftpos, and for Visa and Mastercard debit and credit cards.

The Commerce Commission will oversee enforcement.

If a business applies a surcharge that is no longer allowed, the consumer will be entitled to a refund. The commission can also take legal action to ensure compliance.

Jenée Tibshraeny is the Herald’s Wellington business editor, based in the parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.