What the Surcharge Ban Means for Small Business

From 1 October 2026, the way Australian businesses charge customers for card payments changes significantly.

Following its review of merchant card payment costs and surcharging, the Reserve Bank of Australia is removing its protection for surcharging. eftpos, Mastercard and Visa have each said they will introduce no-surcharge rules from that date. American Express is doing the same on credit. At the same time, interchange fee caps are being cut and new transparency obligations are being introduced.

There has understandably been concern from small business about what this means. If you’re currently charging customers 1.5%, 1.75% or more than 2% on every card transaction, removing that surcharge looks like an immediate new cost.

I think there’s another side to it.

What actually changes on 1 October 2026

One point of accuracy worth making, because it gets reported loosely: the RBA has not banned surcharging by decree. For over twenty years its Surcharging Standard stopped the card networks from writing no-surcharge rules into their own scheme rules. The RBA is now lifting that prohibition, and eftpos, Mastercard and Visa have each said they will impose no-surcharge rules from 1 October. American Express isn’t regulated by the RBA at all and has volunteered to do the same on credit.

The outcome on your counter is identical. But it explains two things that otherwise look arbitrary: why the coverage differs by scheme and product type, and why the obligation reaches you through your merchant agreement with your acquirer rather than through a regulator. That agreement is where you should look for the specifics that apply to your business.

Why small business is worried

The concern is straightforward. A business currently passing its full cost of acceptance to customers is about to start wearing it.

If your effective rate is 1.75% and you do $40,000 a month in card turnover, that’s around $700 a month that used to sit on the customer’s receipt and will now sit in your P&L. That is a real number and there’s no point pretending otherwise.

Why I think it will be good for business anyway

The surcharge ban should finally give Australian businesses a very strong reason to look at what they’re actually paying for payments. And that should create significantly more competition in merchant acquiring.

Consider a business paying 1.75% and passing the entire cost to its customers. How motivated is that owner to spend several hours comparing merchant facilities to get the rate down? Probably not very. The customer is effectively paying the fee.

Once surcharging disappears, the economics change. If that 1.75% comes out of your own margin, then getting to 1.2%, 1.0%, or whatever competitive rate is available to a business of your profile, suddenly becomes worth pursuing.

That should force payment providers to compete much harder on price. I think it’s the single most important consequence of these reforms.

How we got here

The payments market has changed enormously over the past decade. In hospitality especially, we’ve seen rapid growth in providers bundling point-of-sale software and payments together.

Instead of separately choosing a POS system and a payment provider, the two are increasingly sold as one package. That can be convenient. It also makes the real cost of accepting payments less visible, and makes it harder to shop around for a better payments deal without also changing the system your staff use every day.

Historically, businesses had more freedom here — you could pick the POS platform you liked and run a separate bank or payment provider through an integration such as Linkly. As POS and payments have bundled more tightly, that separation has eroded. A business might genuinely like its point-of-sale system and find it has very little ability to negotiate the payments component on its own.

And when you could simply surcharge the cost anyway, there was never quite enough commercial pressure to challenge it.

Removing surcharging changes the equation. Businesses will start asking a very simple question: why am I paying this much? Providers are going to need a good answer.

The interchange cuts will help — but don’t expect a revolution

There is also a direct reduction in the underlying wholesale cost of accepting cards.

For domestic consumer credit, the interchange cap falls from 0.80% to 0.30%. Commercial and business credit cards keep the 0.80% cap, so they don’t get the same benefit — worth knowing if you sell B2B, because your card mix may look very different to a café’s.

Debit is the one most small businesses should pay attention to, and it’s the one getting least airtime. Domestic debit and prepaid interchange moves to a flat 8 cents per transaction. For most retail and hospitality businesses, debit is the bulk of transaction volume, so this is the change that does the most work on your bill. It also changes the shape of your costs: on a flat cents-based interchange, a $5 coffee and a $50 lunch carry the same interchange. Small-ticket businesses do proportionally better out of that than large-ticket ones.

Foreign-issued cards get a new 1.0% cap. If you’re in tourism, hospitality in a CBD, or anywhere with a high international card mix, that matters more to you than it does to most.

But interchange is only one component of what you ultimately pay. There are scheme fees, acquiring costs, the payment provider’s margin, terminal hardware and rental, installation and deployment, connectivity, support, compliance, fraud and risk management, AML obligations and other incidentals. There is a considerable amount of infrastructure and ongoing service involved in getting a terminal into a business and keeping transactions flowing reliably and securely.

So don’t look at a 0.30% consumer credit cap and conclude interchange is 0.30%, therefore that’s what I should be paying. That isn’t how merchant acquiring works.

Lower interchange will contribute to lower acceptance costs across the market. It won’t, on its own, produce wholesale reductions in your merchant service fee. If you’re already on a sharp rate, the reduction may be modest.

The much bigger opportunity is for businesses currently paying well above competitive market rates. If you’re at 1.5%, 1.75%, 2% or more with reasonable card turnover, that’s where it’s genuinely worth investigating what else is available.

Small-ticket hospitality is where this bites hardest

This is especially relevant to cafés, restaurants and bars processing large numbers of small transactions.

On a $5 coffee, the gap between a competitive rate and an expensive one doesn’t look enormous per transaction. And when the surcharge is passed straight to the cardholder, there’s been little reason for the owner to investigate it. Customers haven’t pushed back much either — if the café next door surcharges too, people simply get used to it.

That incentive structure is about to invert. The payment cost becomes a real operating expense again, and owners will have a reason to read their merchant statement properly and ask whether someone else can do the same job for less.

Some businesses will need to adjust their prices

There’s no point pretending that removing surcharging makes payment costs disappear. It doesn’t. A business currently passing its full cost of acceptance to customers may need to absorb some of it, and some will end up building part of it into general pricing.

But there’s a meaningful difference between automatically adding 1.5% or 2% to every card transaction, and being made to negotiate the lowest possible payment cost first, then deciding how much — if anything — needs recovering through your prices. As an economic outcome, I think the second is better for businesses and consumers both.

What to do before October

The biggest mistake is waiting until the ban takes effect and then absorbing whatever rate you happen to be on.

1. Read your merchant statement and work out your real effective rate. Total fees divided by total card turnover. Not the headline rate you were quoted.
2. Break down your card mix. What proportion is debit, consumer credit, commercial and international? The reforms treat each differently, so your mix determines how much you actually gain.
3. Check what’s bundled. If your POS and payments are sold together, find out whether the payments component can be negotiated or moved at all.
4. Compare the market — properly. Particularly on substantial card turnover, 1.5% to 2% shouldn’t be accepted without testing whether something materially better is available.

The surcharge ban will require an adjustment. But if it forces businesses to pay attention to payment costs, forces providers to compete harder, and makes pricing more transparent, I think the Australian payments market ends up better for it.

If you’d like a second set of eyes on your merchant statement before October, get in touch — working out an effective rate and a card mix takes about ten minutes with the right statement in front of you.

FAQ

When does the surcharge ban start?

1 October 2026. eftpos introduces no-surcharge rules on debit and prepaid, Mastercard and Visa on credit, debit and prepaid, and American Express on credit. Amex isn’t regulated by the RBA — it has chosen to match the others.

Can small businesses still surcharge after 1 October 2026?

No — not on eftpos, Mastercard or Visa, which covers the overwhelming majority of card transactions in Australia. The cost of acceptance becomes an ordinary business expense.

Will the surcharge ban make card payments cheaper for my business?

Partly. Domestic consumer credit interchange falls from 0.80% to 0.30%, domestic debit moves to 8 cents per transaction, and foreign-issued cards are capped at 1.0%. But interchange is only one part of your merchant service fee, so the size of the benefit depends on your current rate and your card mix. Businesses already on sharp rates will see less change than those paying well above market.

Do commercial and business credit cards get cheaper too?

No. The commercial credit interchange cap stays at 0.80%. If you sell B2B and take a lot of business cards, you get less benefit from the interchange reforms than a consumer-facing retailer does.

Should I put my prices up to cover the lost surcharge?

Possibly, but negotiate your merchant rate first. Establish what you can actually get your cost of acceptance down to, then decide how much of the remainder needs to go into your pricing. Repricing before you’ve tested the market means recovering a cost you may not have needed to carry.