Card Surcharges End on October 1. Here's What Businesses Actually Absorb.

From October 1, businesses in Australia can no longer charge customers a surcharge on Visa, Mastercard, or eftpos transactions. The RBA estimates the reform will save merchants $910 million a year. But the headline number hides a more complicated reality for the businesses that have to implement it.

The mechanics of what's changing

The surcharge ban covers debit, credit, and prepaid cards on the three major networks. At the same time, the RBA is cutting the interchange fees that banks charge merchants to process those transactions. For consumer credit cards, the cap drops from 0.8% to 0.3%. For debit, it moves from 10 cents or 0.2% to 8 cents or 0.16%.

That interchange reduction is where the $910 million figure comes from. In theory, lower interchange means lower merchant service fees, which means the cost of accepting cards drops enough that businesses no longer need to surcharge.

In practice, that only works if your payment provider actually passes the savings through. Interchange is one component of the merchant service fee. Acquirer margins, scheme fees, and terminal costs are the others. Unless you actively renegotiate your processing contract, there is no guarantee your overall rate drops by much.

The Amex problem

American Express is not covered by the RBA's regulation. It operates as a closed-loop network, so the interchange cap does not apply. But Amex has voluntarily committed to ending surcharges from October 1 as well.

Here is the catch: Amex has not announced any reduction in its merchant acceptance fees. The surcharging mechanism that let businesses recover the cost of accepting Amex is gone. The underlying cost is not.

For businesses where Amex transactions make up a meaningful share of revenue, this changes the economics. If your Amex merchant fee is significantly higher than Visa or Mastercard, you are now absorbing that difference on every transaction with no way to pass it through.

Who this actually affects

Only about 16% of Australian merchants currently surcharge, according to RBA data. For the other 84%, October 1 changes very little on the surcharging side, though the interchange reduction should still lower their processing costs.

But for that 16%, the maths is real. A business turning over $2 million a year and paying average processing fees of 1.5% carries $30,000 in annual card acceptance costs. If interchange drops halve that, the story is good. If your provider does not pass the full reduction through, you are absorbing whatever remains.

High-volume, low-margin businesses feel this most. Cafes, takeaway shops, retail stores, and service businesses where the average transaction is small but the card-to-cash ratio is high. The Australian Restaurant and Cafe Association has already flagged that menu prices will likely increase from October 1.

What to do before October 1

Pull your merchant statement this week. Look at the actual percentage you are paying per transaction, broken out by card type if your provider shows it. Most business owners have never looked at this in detail. You cannot negotiate what you do not understand.

Ask your payment provider about least-cost routing. This automatically routes contactless transactions through the cheapest available network, typically eftpos instead of Visa or Mastercard. Most providers offer it, but many do not enable it by default. One call to activate it can cut your debit transaction costs meaningfully.

Renegotiate your processing rate before October, not after. Interchange is dropping. Your provider's input costs are falling. That gives you leverage to ask for a lower merchant service fee. If you wait until after October, you lose the negotiating moment.

Decide what to do about Amex. If Amex transactions are a small share of your volume and the fee gap is modest, absorbing it may be simpler than dropping the card. If Amex is a large share and the fee is materially higher, the numbers may no longer justify acceptance. Run the actual calculation.

If you need to adjust prices, do it transparently and early. Folding processing costs into your base prices is not cynical. It is exactly what the reform expects businesses to do. But a quiet 2% price increase in September is better received than a visible jump on October 1.

This article is general information only and is not financial advice.