Customers will no longer be hit with sneaky fees when they pay with debit and credit cards under a move to scrap surcharges later this year.

The Reserve Bank will ban surcharge fees for EFTPOS, Mastercard and Visa transactions — saving shoppers about $1.6 billion a year.

But business groups panned the changes, with hospitality venues expected to raise menu prices to include merchant fees they can no longer pass on.

The central bank on Tuesday said extensive public consultation had not dissuaded officials from making the move from October 1.

“Consumers are estimated to be paying $1.6 billion of a total $1.8 billion in card payment surcharges charged each year on designated card networks,” the RBA said.

The Reserve Bank reported three in four surveyed consumers wanted payment costs incorporated into advertised prices, something Treasurer Jim Chalmers supported.

“Australians absolutely hate this idea there’s a sneaky charge when you tap,” he said.

“By getting interchange fees down, that will be a benefit to some of these small businesses that we hope they will pass on to customers.

“Fundamentally, this is about Australians knowing what they’re paying.”

It will also lower the caps on interchange fees paid by Australian businesses, saving consumers about $1.2 billion. The fee is paid by a business to a customer’s card issuer when there is a transaction.

Consumer group Choice said the changes were long overdue and would help household budgets.

“Card surcharges are a product of another time, and Australians will be glad to see the back of them,” said Choice policy boss Morgan Campbell.

“At a time when so many are doing it tough, the last thing consumers need is to be hit with a surprise surcharge at the checkout, particularly when many businesses no longer accept cash.”

But restaurateurs said consumers wouldn’t save any money when eating out and would be the biggest losers from the change.

The Australian Hotels Association said the only winner was the banks and questioned the point of the entire exercise, also predicting customers would not see any savings.

Consumer card transactions have exploded in the past 20 years, from about 25 per cent in 2007 to 75 per cent in 2022.

Surcharges steamed into the public eye in 2015 when Qantas, Jetstar and Virgin were charging more than $7 per transaction, far exceeding the cost of accepting a card payment.

Then-prime minister Malcolm Turnbull capped surcharges to the cost of accepting the payment, only for companies across all sectors to impose the fees.

“The surcharging framework, introduced more than two decades ago, is no longer achieving its intended purpose of steering consumers towards making more efficient payment choices,” the RBA said in a statement.

“The increased prevalence of businesses surcharging all cards at the same rate, challenges with enforcing the current surcharging framework, and consumers using less cash have reduced the effectiveness of the surcharging regime.”

The RBA will be able to make all the flagged changes under existing powers without legislation being passed.

Lowering the cap on interchange fees by businesses is predicted to benefit small firms the most, because they often pay higher fees.

Better transparency achieved by forcing card networks and large acquirers to publish what fees they are charging has also been recommended to foster competition between networks.

The surcharge removal will kick in on October 1.

An interchange cap on foreign cards and transparency measures for card networks will be implemented in April 2027.

-with AAP