Albo sweet smile is rather shallow and thoughtless.
The new credit card rules are designed to make the cost of living lower for the average Joe. But when you investigate it more deeply, nobody is going to win except for banks and big corporates. You can no longer charge a fee for what you are being charged for. And the banks are hardly reducing their fees. The new rules have made the banks reduce the interchange portion of your fees, and only for domestic cards, not corporate cards. When I ran the numbers on what savings we will get via the bank laws for reduction, it was 6.7% of the normal merchant fee. So, when you hear Albo telling you they have made the banks reduce what they charge, he has, but by hardly anything. My bet is the banks will add to the fees and recoup this anyway.
Let's look at the effect of Albo's great cost of living savings.
In Business
As an example, my retail business was collecting $11,000 per year in credit card fees. We charged 2%. My bank was charging us 1.5%. But at the end of the year, our 2% collected $11,000, and the bank's annual fee was $11,000. That’s because they have other fees involved, like terminal fees, and didn't charge enough fees, etc. So the 2% was true, and the 11k was simply recovering costs. So we can't charge customs card fees, and the banks will charge us $10,263 instead of $11,000. That sweet, innocent smile on Albos face is a mask for a very badly thought-out policy. (Disclaimer - I voted for him) And it gets worse.
We use our credit card for convenience and for frequent flyer points. Even though we know it's smoke and mirrors, as in we really do pay for the points, we trust Qantas to make it so we win, er, really! Anyway, now you can whack that credit hard and get free frequent flyer points. So now I expect customers to use their cards more now that it does not cost anything and they get free frequent flyer points. So that $10,263 credit card charge is likely to skyrocket with the extra card usage. I predict that the $10,263 loss to my business will become more like $16-18K over the next year.
Now, how am I going to recoup that expected loss? The only way I can think is to determine the percentage of loss to my annual sales and put all prices up accordingly to cover the cost. I can't just put up prices for those that spend on card, so everyone will have to cover the costs. Big Corp is sure to do this. Don't for a minute think that Qantas, Woollies, Ampol, energy providers, etc. are just going to cop the loss. In business, the ones that are going to cop the loss are small businesses that don't have the resources or time to go through the small increase that is needed to cover the profit leak.
In my retail business, I would need to increase my prices by 0.0038% to cover the ALBO cost, but as I expect card usage to increase I better double that to a 0.0076% increase. What is a small business going to do to that figure? I reckon most will just say make it 1% or perhaps 2% to make up for the ever-increasing cost of doing business. I reckon all the big businesses are doing this right now, so we can expect the cost of living will be going up over the next few months, and for those that don't use credit cards to pay for things, there is no mechanism to isolate your payment style so everyone cops it. This ill-thought-out new rule is going to increase inflation, not make things cheaper.
Effect on consumers
Let's say a coffee costs $4.50, and you pay a 1.5% surcharge when you tap- you really pay $4.57. Keep an eye out for what you will now pay. $4.57 is not practical, so it will likely be $4.60. Or why not grab a bit of extra to cover costs and make it $4.70. That's inflation right there.
People who don't use credit cards will be caught up in the price hike, so your amazing financial management is going to be punished by Albo's brilliant cost of living strategy.
Will Frequent Flyer points remain free? Unlikely. Have you ever known airlines or big corporations to take a hit without passing it on? I expect that there will be new rules around frequent flyer points showing up real soon.
Here's a suggestion: Get your data together; work out your annual merchant fee recovery and your costs. Get your Merchant statements and put it all into ChatGPT or Claude and ask it to analyse the expected losses to your business over the next financial year. Mention also that it is likely that credit cards will be used more due to the no-charge policy Albo has brought in so it can factor a projection.
Here's another aspect to consider. Some small businesses are likely to cancel the credit card facility and revert to cash only, paving the way for a cash economy that ends up losing government tax dollars.
These kinds of "glinted smile" style policies sound like relief. Still, when you look deep into them, they lead to increased prices and increase cost of living and allow big corps to raise prices a little more than necessary for a profit adjustment. All that leads to inflation, which hands the RBA a reason to raise interest rates, which hits mortgage holders only in the hip pocket.
The banks are going to win big time with this! Why do government favour banks over the public? Who is in Control?