Surcharge ban fails the pub test for businesses and consumers

AUSTRALIANS may no longer see an extra card fee appear on the EFTPOS machine, but local businesses say that does not mean the cost has disappeared.

New card payment rules came into effect across Australia on October 1, preventing businesses from adding a surcharge when customers pay using Visa, Mastercard, American Express or EFTPOS cards.

The changes are intended to simplify payments, improve price transparency and reduce card payment costs.

The Reserve Bank of Australia (RBA) estimates consumers had been paying around $1.6 billion each year in card surcharges on designated card networks.

It estimates broader reforms, including lower interchange fee caps, will reduce wholesale card payment costs for businesses by around $910 million annually.

However, for many small businesses, particularly those operating on tight margins, there is a simple problem with the new system.

The cost of processing a card payment has not disappeared.

The RBA acknowledges businesses will continue to incur card acceptance costs and can incorporate those expenses into their overall pricing rather than charging them separately.

That has prompted concerns that the change may simply shift the cost from the EFTPOS machine to the price tag.

Michelle Nohotima, who operates several businesses in the Camden Haven region, said the loss of surcharge revenue would place significant pressure on her businesses.

“Our newsagency will be out approximately $1,500 per week, and our health food store about $600 per week,” Ms Nohotima told News Of The Area.

“We are no longer allowed to pass those fees on to customers as a surcharge, so we have to absorb them or find another way to cover the cost.”

Ms Nohotima said increasing prices was particularly difficult in the newsagency business.

“Businesses can increase prices where they can, but unfortunately, due to the nature of the newsagency business, that is really tough,” she said.

“Some businesses will introduce a minimum card payment amount. Ours is $10. Another option is to absorb the cost, but who can afford to keep doing that? For some, the last option could be to close their doors.”

She questioned whether customers would ultimately be better off if businesses raised prices to recover their payment costs.

“I don’t believe customers will be better off overall if the small surcharge they previously paid is replaced by higher prices,” she said.

“What I would like to see is banks stop charging businesses transaction fees. We already pay fees to rent the machines.”

For Ms Nohotima, the impact extends beyond the balance sheet.

“Personally, this has devastated me. I have fought so hard to keep our services open in the community, and now this extra cost could close our doors,” she said.

“I am hoping the community will support us by paying with cash where they can, so we can keep serving the community and keep locals in a job.”

Her concerns highlight the difficult choices facing businesses that previously recovered card payment costs through a separate surcharge.

Some may absorb the expense, reducing already tight margins, while others may increase prices across their products and services.

For consumers, that could mean paying more regardless of whether they use cash or card.

That possibility has led some in the business community to question whether the change passes the pub test.

While removing an unexpected fee at the checkout may make pricing simpler and more transparent, somebody still has to cover the cost of processing the transaction.

Camden Haven Chamber of Commerce Treasurer and local business owner Amy Vandenhurk said the issue needed to be considered from both the consumer and small business perspective.

“Both small business and customers face significant pressure from the increased cost of living,” Ms Vandenhurk told News Of The Area.

“Businesses have been forced to reassess the way they charge, with some opting to no longer accept credit card payments, impacting anyone who has previously relied on this method.

“This change should put pressure on the banks to create a more innovative and affordable payment system that supports both small business and consumers.”

The change comes at a challenging time for many small businesses, which are already managing higher operating costs while consumers remain cautious about discretionary spending.

There are benefits to the reforms.

Removing separate card surcharges makes upfront pricing clearer, while lower interchange fee caps and greater transparency around merchant fees are intended to help businesses secure better value from payment providers.

Some further reforms take effect in April 2027.

But for businesses on the ground, the real test will be whether those savings are enough to offset the costs they can no longer directly pass on.

For consumers, the surcharge may have disappeared from the EFTPOS screen.

Whether they ultimately save money is another question.

By Luke HADFIELD