Government’s credit card fee cap comes into force today

Commerce and Consumer Affairs Minister David Clark has capped merchant fees. Photo / Mark Mitchell

Fees charged on things like credit card and payWave transactions will be lower as of today, thanks to new regulations that come into force.

The changes are expected to save merchants $74 million each year, some of which the Government hopes will be passed on to consumers.

Commerce Minister David Clark said the regulations were the culmination of a campaign pledge made in the 2020 election.

“We made a campaign promise in 2020 to reduce merchant fees. Today, we deliver on that promise. This is a win for both small business and consumers,” Clark said.

“The Retail Payment System Act passed in May, just six months ago. Government has moved to implement change as quickly as could be done,” he said.

That legislation was particularly popular in Parliament, passing with the support of every party but Act.

Clark said it was “unfair that retailers, especially small retailers, have been constantly stung with high fees for offering services they need to survive”.

Merchant service fees are the fees paid by retailers to accept credit cards and some debit card payments. The major cost component of any merchant service fee is the interchange fee. This is the charge from the retailer’s bank to the customer’s bank for processing the payment.

Many shops choose to pass this fee on to consumers for using credit cards or payWave, resulting in higher prices.

It is hoped that this practice will end, or the passed-on fees will be lower, thanks to the legislation.

The cap on credit interchange fees is set at 0.8 per cent, in line with fees charged in Australia.

The legislation also caps fees for online debit transactions at 0.6 per cent.

“The changes expected to save merchants in New Zealand conservatively $74 million each year over time. And, with overheads dropping, I’d expect to see consumers benefit from savings,” Clark said.

“The Commerce Commission has also been given a broad suite of powers to intervene and regulate different participants in the retail payment system. It is currently monitoring to ensure that businesses pass on the reduction in fees to their customers.”