The case for change sounds simple enough: one price, no add-ons, no surprises at the end of a transaction.<\/p>\n
But credit card companies, banks, restaurants and others are already warning<\/a> they could raise fees and prices in other areas once card surcharges are banned.<\/p>\n That means we could see costs shifting, rather than falling.<\/p>\n How a card payment actually works<\/p>\n Most people experience paying by card as a direct exchange with a shop. Behind that tap, several other parties are quietly collecting their share before your money reaches the shop.<\/p>\n When you pay at a cafe, your bank approves the transaction and releases the funds. The cafe\u2019s bank receives that money on the business\u2019s behalf. Between them sits the card network \u2013 usually Visa or Mastercard \u2013 routing the payment from one to the other.<\/p>\n Then there\u2019s the payment service provider, the company behind both the software processing the transaction and the physical device you tapped your card on.<\/p>\n Each of them charges for what they do. When a business applies a surcharge on card payments, it\u2019s trying to claw back some of these costs.<\/p>\n The single largest charge is the interchange fee, currently capped<\/a> at 0.8% of your purchase for credit cards and 0.2% for debit cards, paid to banks.<\/p>\n The Reserve Bank regulates most of these fees (other than the payment service provider fees) and its October changes aim to bring down those costs.<\/p>\n (These changes won\u2019t apply to American Express cards or \u201cbuy-now pay-later\u201d like Afterpay, which will be looked at in a separate public consultuation starting in mid-2026.)<\/p>\n What\u2019s changing from October<\/p>\n From October 2026, surcharges on most debit and credit card transactions will be banned<\/a>.<\/p>\n Interchange fees paid to banks will be capped below their current levels. For credit cards, those fees will drop from 0.8% to 0.3%.<\/p>\n And for debit cards, the fee will drop from the current rate of either 10 cents or 0.2%, down to either 8 cents or 0.16% (whichever is lower).<\/p>\n That\u2019s expected to cost banks an estimated $660 million a year<\/a>.<\/p>\n The Reserve Bank (RBA) decision was based on a clear principle: what the price tag says should be what the customer pays, regardless of how they choose to pay.<\/p>\n The RBA said they were responding to \u201cstrong feedback\u201d from a public survey, which found three-quarters (76%) of people wanted surcharges to end<\/a>.<\/p>\n Which consumers look set to pay more<\/p>\n The RBA estimates a surprisingly low share of merchants \u2013 just 16%<\/a> in 2024\/25 \u2013 add surcharges for card payments. But that\u2019s doubled since 2022, making it harder for consumers to avoid unexpected, costly surcharges.<\/p>\n The central bank acknowledges that from October, businesses that have had surcharges \u201cmay increase their advertised prices to cover the cost of accepting card payments\u201d. But it expects those price rises \u201cto be negligible\u201d.<\/p>\n In practice, the RBA is saying that if you pay a card surcharge at your local cafe today, expect its prices to rise slightly in October, once surcharges are banned. If you always pay by credit card now, you might not notice any difference then.<\/p>\n But if you\u2019re in the minority of Australians<\/a> who pay with cash, or insert a debit card into the eftpos machine to pay lower surcharges, you could end up paying slightly more at some businesses from October than you do now.<\/p>\n The Australian Restaurant and Cafe Association has said<\/a>:<\/p>\n We expect menu prices will increase on October 1 and for any business that does not pass costs on, their profit will drop. Consumers will now pay $5.10 for a coffee that used to cost them $5.08, and the biggest losers are cash payers.<\/p>\n Australian banks have also said<\/a> they may have to make up their losses with higher card fees, higher rates or shorter interest-free periods.<\/p>\n Lessons from overseas<\/p>\n The European Union<\/a> and United Kingdom<\/a> banned card surcharges back in 2018, arguing it would save consumers money and avoid nasty surprises at the checkout.<\/p>\n Past studies from the Netherlands<\/a> showed that when extra card fees are removed, people are more likely to pay by card. Widely-cited research by economists David Evans and Richard Schmalensee<\/a> explains that in payment systems, when pricing changes like this, the costs don\u2019t disappear \u2013 they just move around.<\/p>\n The real lesson from what the EU has done is that beyond banning surcharges, you also need to give people better options<\/a> to avoid card payments completely.<\/p>\n Other countries like India, China, Brazil and Singapore have already made it easier to pay without a card<\/a> than Australia.<\/p>\n Hard choices for smaller businesses<\/p>\n The RBA\u2019s move to cap interchange fees should ease some cost impacts, both for consumers and for business. The RBA estimates businesses will save $910 million through lower interchange fees.<\/p>\n For larger businesses, the new interchange cap is largely beside the point. Their transaction volumes already gave them the leverage to negotiate rates directly with card networks \u2013 well below the ceiling the RBA has now set.<\/p>\n According to the RBA, 89% of large businesses<\/a> are not surcharging customers now.<\/p>\n The RBA says most small businesses will be better off from October, as 85% of small merchants don\u2019t add a surcharge now.<\/p>\n For smaller businesses that have had surcharges \u2013 like a local pharmacy or independent grocer \u2013 the good news is their overall card fees will now be lower. But they won\u2019t vanish entirely.<\/p>\n That leaves them with limited choices: absorb a hit to margins, or lift prices.<\/p>\n What to expect in October<\/p>\n From October, paying by card will feel cleaner. One price, no additions. That will feel like a genuine improvement.<\/p>\n But a simpler checkout is not necessarily the same as a cheaper one.<\/p>\n Whether shopping actually becomes less expensive is a different question \u2013 partly depending on whether you\u2019re someone who\u2019s been avoiding surcharges by paying with cash, but also on how banks and businesses respond by raising other prices. *Vibhu Arya<\/a>, PhD Student, UTS Business School, University of Technology Sydney<\/a> and Wen Helena Li<\/a>, Senior Lecturer, UTS Business School, University of Technology Sydney<\/a>.\u00a0This article is republished from The Conversation<\/a> under a Creative Commons license. Read the original article<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"By\u00a0Vibhu Arya & Wen Helena Li* From October 1, 2026, Australians will no longer pay a fee for…\n","protected":false},"author":2,"featured_media":364410,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[138,219,111,139,69],"class_list":["post-364409","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-economy","tag-new-zealand","tag-newzealand","tag-nz"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/364409","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=364409"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/364409\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/364410"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=364409"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=364409"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=364409"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"The](\"https:\/\/www.newsbeep.com\/nz\/wp-content\/uploads\/2026\/04\/1775364131_675_count.gif\")
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