Card Surcharges Are Banned. Early Prices Tell a Messier Story.
Australia banned credit and debit card surcharges on 1 October 2026 under a Reserve Bank-led reform to make prices clearer and, over time, lower bank fees. The Guardian
The scope is broad. It covers the eftpos, Mastercard and Visa networks. The Payments System Board, the Bank's payments rule-maker, gave effect to the change by lifting the ban on 'no-surcharge' rules for those networks. It also cut the caps on interchange, the wholesale fees banks pay each other when you tap, from the same date.
Before the reform, surcharges averaged about 1.5% of the transaction. About 16% of businesses charged them to cover card costs. The Reserve Bank said it was in the public interest to remove surcharging because it was no longer achieving its intended purpose.
No one in Canberra or Martin Place pretended prices would stand still. The Bank itself said shelf or menu prices would probably have to rise without surcharges. Business groups warned the ban would force them to lift prices before it started. Reuters
That flow-through arrived fast. Many cafes and restaurants charged higher coffee and menu prices in the first weekend after the ban. Think of it like a pizza shop folding the delivery cost into the menu instead of adding it at the checkout.
The early coffee numbers cover more than 1,500 cafes. Tracker Small Flat White reported 17% have raised prices since the ban began. Among those that did, the average rise was 50 cents, or more than 10%. That is well above the surcharge it replaced.
UBS economist Stephen Wu said resilient spending and high inflation may let merchants use the change as 'cover' to pass on wider cost pressures. He said evidence of 'round-up' pricing on items like coffee suggests the rise could exceed the old surcharge.
The regulator heard it too. The ACCC warned businesses they must not mislead customers by blaming the ban for a rise that also reflects other costs. It said rebadging the surcharge as another fee or charge to get around the ban may be misleading conduct.
Then came the Commonwealth's own problem. The Australian Taxation Office said it would no longer take credit card payments for tax owing. Treasurer Jim Chalmers intervened. The government will provide extra funding to the ATO to cover the surcharge cost until the middle of next year.
Credit card rewards were expected to fall once surcharges ended, as tighter interchange caps squeezed bank revenue. That adjustment was flagged well before October. The Guardian
The broader context here is the cost-of-living promise versus the pricing mechanics. The government says clearer prices and lower bank fees will ease pressures over time. The figures so far point to a lumpier path, with a minority of merchants moving first and by more than 1.5%.
Looking at what this means for compliance, the ACCC has drawn two lines. The first is attribution. Blame the ban for a rise driven by beans, wages or rent and risk action. The second is relabelling. Call it a service fee or handling fee but collect it as a card surcharge and risk action.
In my view, the ATO episode is the one to keep. A central agency built to collect revenue would rather refuse plastic than absorb the merchant cost. Treasury had to fund the difference. That says plenty about who carries the cost when surcharging is banned but interchange and scheme costs remain, even at lower caps.
