Card surcharges banned for Australian shoppers

Starting October 1, Australian businesses will no longer be permitted to impose additional fees on customers using debit, credit, Eftpos, or prepaid cards for transactions. The Australian Restaurant and Cafe Association has described this shift as a significant milestone in the nation’s payment history, warning that many small businesses are ill-prepared for the change. This reform follows an extensive review by the Reserve Bank of Australia, which decided to eliminate surcharges across designated card networks—Eftpos, Mastercard, and Visa—with American Express voluntarily adopting the policy.

How Payment Methods Have Changed

In 2003, the Reserve Bank allowed card surcharges, and at that time, Australians predominantly used cash for transactions. By 2007, cash still dominated with 69 percent of payments, while debit and credit cards accounted for only a quarter of payments. Fast forward to 2025, and the environment has shifted, with cards now making up nearly three-quarters of payments, and debit cards being the preferred method, constituting 49 percent of all payments, followed by credit cards at 23 percent.

Each card transaction incurs a cost for businesses, ranging from 0.43 percent for Eftpos debit cards to about 1 percent for Visa or Mastercard credit cards, and up to 1.36 percent for American Express credit cards. Without the option to add a surcharge, businesses will either absorb the cost or factor it into higher prices, effectively passing it on to all customers regardless of their payment method.

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Shoppers Who Use Cash Will Be Impacted

Customers who frequently use cash will likely notice the most significant difference, as they currently avoid card surcharges. Although cash accounted for around 15 percent of consumer payments in 2025, it is used in nearly a quarter of purchases under $10. However, shoppers at major retailers like Woolworths, Coles, or JB Hi-Fi should not expect any changes from October 1, as these businesses rarely apply card surcharges at checkout. The impact will be more noticeable at the 16 percent of businesses that do apply surcharges, including Aldi supermarkets, local grocers, and some online stores.

The Reserve Bank has acknowledged businesses will still incur costs when accepting cards after October 1—and that “those costs can be reflected in a business’s overall pricing.” If all card surcharge costs were instead built into prices, the Reserve Bank has estimated it could add about 0.1 percent as a small, one-off impact on measured inflation.

While consumers have already been paying these costs via payment surcharges, those were not included in the Consumer Price Index (CPI) used to track inflation. The central bank argues this will reflect what most customers say they want: no surprises at the checkout. Consumers who shop at businesses that currently surcharge will pay similar amounts as they are paying now (just in a different form, via the sticker price rather than the surcharge).

Schools Add Fees to Offset Costs

This week, Flexischools, used by more than 2100 schools across Australia for canteen orders, notified parents that from October 1, it will increase its existing order fee by 6 cents per student, per order, plus introduce a $10 minimum at checkout “to help manage the cost of processing small payments now that surcharging has been removed.”

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Behind every card payment are several costs, including ‘interchange fees’: a fee paid by a payment service provider, such as PayPal, Stripe, or Square, to the cardholder’s bank. The Reserve Bank aims to lower wholesale card payment costs for businesses by about $910 million a year by cutting those interchange fees. The cap on consumer credit card interchange fees is falling from 0.80 percent to 0.30 percent, a reduction of 50 basis points. Debit and prepaid card caps are falling from 0.20 percent to 0.16 percent, while commercial credit cards remain unchanged at 0.80 percent.

Large businesses generally have the scale and bargaining power to negotiate lower payment costs. Reserve Bank data show large merchants typically pay around 0.6 percent in payment costs. In contrast, Reserve Bank data show the vast majority of small businesses (81 percent) are on a different type of pricing plan. This means they typically pay around 1.4 percent of the transaction value now to accept cards. Before these October 1 changes, that is why many small businesses often charged a card surcharge fee of about 1.4 percent at the end of a transaction.

Banks Reduce Rates for Businesses

After the changes take effect, businesses should see some reduction in what they are charged to use cards, as the consumer credit card interchange cap is coming down by 50 basis points. However, Australia’s biggest bank, the Commonwealth Bank, has announced that from October 1, it will reduce its flat merchant rate from 1.10 percent to 0.99 percent per transaction. This illustrates a key point: a 50-basis-point cut in the wholesale interchange cap will not automatically translate into a 50-basis-point reduction in what every business pays.