Australia’s central bank’s decision to cut merchant credit card fees and permit merchants to charge customers fees for using credit cards will hit the bottom line of issuers. Future earnings of National Australia, ANZ Banking Group, Commonwealth Bank, and Westpac could be reduced by up to 2%. The major global card networks, VISA and MasterCard, may also get tangled up in similar reforms launched in other countries. American Express is not subject to reforms by the Reserve Bank of Australia. The RBA announced yesterday it will drop average interchange fees by 40% and lift the restriction imposed by credit card programs which prevent merchants from recovering from cardholders the costs of accepting credit cards. Interchange fees will decrease from around 95 basis points to approximately 55-60 basis points by July 1, 2003. The Reserve Bank’s standard on merchant pricing will come into force on January 1, 2003. The RBA also announced an end to restrictions imposed by credit card networks which limit the entry of new competitors. Specialist credit card institutions authorized and supervised by the Australian Prudential Regulation Authority will now be eligible to apply to participate in credit card programs. There are approximately 10 million cardholders among Australia’s population of 20 million.