Least Cost Routing: Your Best Lever After the Surcharge Ban
You can't surcharge from 1 October, but you can still cut what a card costs you. Here's how least cost routing works and why it matters more now.
Least cost routing is something you want turned on. For most merchants it’s going to save you money, and for some of you it could save a lot.
What is least cost routing?
Least cost routing is where a dual-network debit card — one that carries both a scheme logo (Visa or Mastercard) and the eftpos logo — gets sent down whichever of those networks is cheaper for that transaction, instead of automatically defaulting to the scheme rail.
In practical terms: you’ve got a Commonwealth Bank account with a debit card on it. That card might be a Mastercard debit card, and on the back of it you’ll also see the eftpos mark. That means the same card can be processed two ways — through the eftpos network rails, or through the Mastercard rails. We often call these network schemes. Whichever rail you use is dependent on the cost.
So really, that’s what least cost routing is in Australia: moving transactions that were traditionally going through the Mastercard and Visa scheme rails, and pushing those down the eftpos rails instead, where it’s cheaper to do so.
Whether it actually helps you depends on how your bank prices you
This is the part that decides whether routing does anything for you at all.
It’s the cost to the bank, and it depends on how the bank — the acquiring institution, whether that’s Commonwealth or anyone else — passes that cost on to you.
Some acquirers do cost-plus pricing. Some do blended. If you’re on cost-plus, routing is 100% your friend — any change in the cost base from routing gets passed straight through to you, because that’s what cost-plus means. If you’re on a blended rate, your acquirer is probably already routing your transactions, but you’re not necessarily seeing the benefit of it. You can still use that conversation to try to get a better price.
Say you’re a cafe selling $5 muffins, and you’re on cost-plus pricing. Any saving in the cost base from routing flows straight to you. So really, your options are: the transaction goes through Visa or Mastercard rails, or it goes through eftpos rails. Why would you do that? Because the two rails have different cost bases.
What actually makes up the cost
For the merchant, the cost of a transaction is made up of a few things: the scheme fee, the interchange fee, and the acquirer’s own margin on top. Those are the fees involved.
Scheme fees often have a percentage component and a fixed component attached. Interchange can be a fixed amount — six cents, eight cents, four cents — or a percentage. That matters, because as your average transaction size gets smaller (think the muffin example), the benefit of pushing a transaction through eftpos isn’t as strong as it is if you’ve got a large average transaction size.
Interchange rates are published, and they’re changing on 1 October 2026. From that date, the debit interchange cap falls to 8 cents per transaction or 0.16 per cent of the transaction value — whichever applies. Credit cards can’t be routed through eftpos (with very few exceptions), so this only matters for debit.
| Rail | What it costs (roughly) |
|---|---|
| Visa / Mastercard debit interchange, from 1 October | 8c or 0.16%, whichever the scheme applies |
| eftpos debit interchange | Set by your acquirer — often a flat few cents (four to seven cents is typical), and it can vary between dual-network and single-network cards |
On a high-value transaction — say $1,000 — the eftpos side of that comparison gets very cheap, very fast. There’s still a scheme fee, and the bank still needs its margin, but the total can end up well under the 0.16% interchange ceiling alone that applies on the Visa/Mastercard side — before you’ve even added the scheme fee and the bank’s cut on top of that.
If you want the exact current numbers for your own card mix, you can look up eftpos, Visa and Mastercard interchange schedules for Australia directly, or ask an AI to help you work through the calculation. Otherwise, talk to a payments broker or comparison service, or get in touch through this site if you want a hand working out which pricing model you’re actually on.
Where the savings actually show up
Leveraging a high average transaction value — as long as you’re not a risky-category business — is where least cost routing can be fantastic for you. Low average transaction size (the muffin cafe) gets a smaller relative benefit than a business with a high average transaction value, because the fixed-cent side of the interchange comparison matters less as the dollar value climbs.
This is exactly why how you’re priced matters more than the headline saving — routing only helps if the saving actually reaches you, not just your acquirer.
Least cost routing online, too
Least cost routing isn’t just a card-present thing. It’s available in a lot of instances online as well, and it can make a real difference if you’re selling to Australian consumers online and your transaction size is decent.
Online, prices are generally higher than card-present — there’s more competition for card-present terminals than there is online, and that’s been the case for a long time. Providers like Stripe, for instance, are on the expensive side. If you’ve got a lot of turnover online, it’s worth understanding whether you’re using least cost routing there and how you can benefit from it — because if you’re on a blended rate online, you won’t see the benefit. It’s the acquirer, the bank, or the broker who benefits from it instead, not you.
With the surcharge ban landing at the same time as all this, now is a genuinely good time to look around and make sure you’ve got the right setup — not just for surcharging, but for what you’re actually paying underneath it.
FAQ
What is least cost routing?
It’s the ability to send a dual-network debit card transaction down whichever network rail — eftpos, Visa or Mastercard — is cheaper, instead of it defaulting to the scheme rail automatically.
Does least cost routing work for online transactions?
Yes, in many cases. It applies to card-present and a lot of online transactions, though the benefit depends on your transaction size and whether your provider is passing routing savings through to you.
Will least cost routing actually save me money?
It depends how you’re priced. On cost-plus pricing, any saving from routing passes straight to you. On a blended rate, your acquirer may already be routing your transactions without you seeing the benefit — which is worth raising with them directly.
Does least cost routing work on credit cards?
No, or only in very rare cases. Credit cards generally can’t be routed through the eftpos network — this is a debit (and prepaid) card feature.
Why does my transaction size matter?
Interchange has both a fixed-cent component and a percentage component. On a low-value transaction (a $5 coffee), the fixed-cent side dominates and the routing benefit is smaller. On a high-value transaction, the percentage-based scheme interchange becomes the bigger cost, so routing to the cheaper rail saves more.