Surcharges paid by Australians using debit cards could be banned, as the federal government prepares to scrap the extra cost amid growing resentment among the nation’s shoppers at being charged to use their own cash.

Ahead of a Reserve Bank inquiry into the payments system, Prime Minister Anthony Albanese and Treasurer Jim Chalmers on Monday signalled they would directly intervene in the financial system to push down costs imposed on retailers and their customers.

The use of cards, phones and smartwatches to pay for goods and services was supercharged by the COVID-19 pandemic. In 2022, cards accounted for more than three-quarters of all payments, with debit cards used in 51 per cent of cases. Cash now accounts for just 13 per cent of transactions.

While major retailers usually don’t charge surcharges for these payments, small businesses are often forced to pass on the cost of the electronic payment system to shoppers. Those surcharges can vary widely, from 1 per cent of the cost of a purchase up to 10 per cent, with the total cost imposed on consumers estimated at up to $4 billion a year.

By law, businesses can impose a surcharge on card payments, but it must not be more than it costs the business to use that payment type. They must also offer a fee-free payment system, usually cash.

Albanese and Chalmers said the Australian Competition and Consumer Commission, which has legal responsibility for policing surcharges, would get a $2.1 million funding boost to target “illegal and unfair surcharging practices”.

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But Chalmers said in light of the RBA review of the payments system, the government was prepared to outlaw surcharges on debit card payments from the start of 2026.

“Consumers shouldn’t be punished for using cards or digital payments, and at the same time, small businesses shouldn’t have to pay hefty fees just to get paid themselves,” he said.