Pericles, the way I understand it, the banks actually own the
Eftpos system, so I have a Westpac card and can charge straight
from my bank account, at no cost to me.

I also have a Visa credit card, where the retailer gets slugged anything
up to 3%, depending on their size, agreement etc. In higher margin
transactions that would worry them less, but in groceries, it
would add up, for margins are slim. The banks have to pay Visa
a fee for using their system.

The way I understand it, this system just cuts Visa out of the
equation.

You don't pay a transaction fee if you withdraw cash from an ATM belonging to your own bank or credit union.
Judging by the queries in this thread, we have a mushroom's understanding of how cash is withdrawn from you and me.
Since Woolworths and its associates are more sure of payment by a valid debit card, this latest move to charge a fee for the use of debit cards must be, as Pericles says, something to do with the commissions involved with the use of credit cards. Why charge a fee on debit cards now, as people change over to them to avoid high interest rates? UK debit cards don't incur a fee in the UK - yet. Who's got their grubby fingers in the till? One thing's for sure: this move is for the benefit of Woolworths et al, not their customers. Their mission is to turn everyone into a consumer cash cow. Boo! Not moo, yet.

I asked my credit union (CUA - one of Australia's largest) to comment on Woolworth's move to charge customers a fee for paying with a debit card:

CUA stated:

"The Woolworths decision to deny customers the choice of payment method is an unfortunate one that has impacted many customers and financial institutions alike. As you will be aware, CUA is a mutual financial institution that exists to benefit our members across a number of areas including products, services and fees. We are conscious of the impact that decisions such as this have on our members.

The industry is currently reviewing the impact of the decision and Abacus, the credit union and building society industry body, continues to lobby in this regard. The decision will have a negative financial impact on CUA and we are currently reviewing our fee position and our product suite to ensure we satisfy the requirements of the majority of our members. More information on changes to products and fees will be provided to members as it comes to hand."

I'm confused. The Commonwealth Bank doesn't charge me any fees for EFTPOS transactions. And they are apparently one of the evillest, most insidious banks out there. And NAB recently scrapped almost every fee from retail banking. Do others really charge a fee?

To Otokonoko:

There are no free lunches. The fees are not so bad if you can limit the use of your debit card to 10 transactions a month and you're a member of Credit Union Australia:

"In relation to fees charged for using a CUA Visa debit card at Woolworths stores, this is now an EFTPOS transaction and forms a part of the monthly free transactions provided for your account. You currently have 10 free transactions per month. Should you exceed the number of free transactions there is an excess transaction fee applied.

"When using your Visa debit card you are able to select the credit button. Currently you are offered to either sign a voucher or enter your PIN number. When you select either Cheque or Savings, this is an EFTPOS transaction, and can only be completed by entering your PIN number. "

But Australians still get slugged at both ends for using our debit cards for overseas transactions. There's a hefty 2 to 7 pounds charge in the UK and a 2% charge by CUA here, on top of the exchange rate which resembles that of a third world country no matter how the rate fluctuates. I guess there has to be some price to pay for living in the best country in the world.