Australians lose AUD $500 annually due to dishonour fees

New research has found that dishonour fees charged by banks and payment platforms are costing Australians up to AUD $500 annually, causing significant financial and emotional strain, particularly for vulnerable individuals and small businesses.

The survey, conducted by GoCardless and involving more than 1,000 Australians, revealed that nearly one in three Australians (32%) were charged a dishonour or failure fee in the past year. Half of these respondents reported being charged up to AUD $50, while the other half faced charges anywhere from AUD $50 to over AUD $500 over the same period.

Diminishing trust and financial stability have emerged as key concerns, with 82% of those charged saying the fees contributed to financial stress, and 74% reporting they were left in a worse financial position as a result. Nearly nine in ten respondents (87%) called for these fees to be banned or at least limited, and 86% indicated they would return to businesses that do not impose harsh penalties for late payments.

Kyle Willersdorf, Acting General Manager at GoCardless ANZ, commented: "Dishonour fees are driving vulnerable Australians deeper into financial difficulty, creating unnecessary hardship and distrust. It's time for the industry to reevaluate what is considered a fair way to make money. More importantly, this is an opportunity for the Government and regulators to step in and stamp out these unfair and unethical fees. With the election on the horizon, action has already been proposed to crack down on excessive card surcharging, we think it's time dishonour fees were part of the conversation too.

"These fees are generally unfair, but disproportionately impact vulnerable Australians, often triggering overdrafts, further bank charges, and can lead to debt. It's a slippery slope that can quickly escalate into serious financial distress. We believe dishonour fees are unethical, unfair, and exploitative. They should never be treated as a revenue opportunity, and frankly, they have no place in a fair payments system."

The study indicates widespread confusion about the origins of these fees. While 53% of respondents assumed dishonour fees were charged by banks, they are usually imposed by payment providers, whom only 6% of people identified as responsible. This misunderstanding has led to businesses — particularly small businesses and gyms — bearing the brunt of consumer frustration.

Jonathan Quieros, owner of Duke's Gym, outlined the practical impacts: most payment platforms applied significant late payment fees, and customers often blamed the businesses themselves. These misunderstandings have harmed customer relations, leading some businesses to overhaul their payment systems in response.

The research reveals that insufficient funds account for 57% of payment failures, and 36% result from outdated payment systems, such as expired cards, suggesting routine financial challenges are being turned into recurring revenue streams for payment providers. The emotional and financial toll is clear, with 82% of those charged reporting unnecessary financial stress and three-quarters saying the fees left them worse off financially.

The unfairness of these charges is widely recognised, with 76% of survey respondents labelling them as unfair, and 41% of those noting that the fees were disproportionately high. Nearly half (49%) of those who viewed the fees as unfair said businesses should adopt a more sensitive approach, especially during tough economic circumstances.

Kyle Willersdorf, Account Director for Australia and New Zealand at GoCardless, stated: "Australians have made their stance on dishonour fees loud and clear: these archaic and unnecessary charges are flat-out harmful to businesses and customers. They also unfairly damage the reputation of small and medium businesses, which are often blamed for fees driven by outdated payment systems. Too often, these charges turn failure into a revenue stream for payment providers, instead of incentivising them to work with their business customers to improve payment success."

Regarding industry practices, Willersdorf added: "Charging dishonour fees is optional for payment service providers (PSP), and it's something GoCardless has opted to avoid doing. Our perspective is that if a PSP earns money from a business' misfortunes, then it is not aligned with that business' best interests. We operate – and encourage other PSPs to operate – in a way that better aligns with the priorities of both businesses and consumers."

He also pointed to alternative approaches to managing failed payments: "For example, GoCardless proactively manages payment failure with the help of Success+, our AI-powered tool that increases success rates to help businesses recover, on average, 70% of all payments that initially fail -- whilst minimising disruptions to service for customers. By adopting transparent, innovative and customer-first practices, businesses can reduce frustration, improve loyalty, and build a reputation for fairness and reliability."

The survey results come amid ongoing debate about fairness and transparency in the payments industry, with dishonour fees now under scrutiny alongside other consumer surcharges.