Article copy (as submitted, AU spelling checked):
Since 1 October, Australian businesses have not been allowed to add a surcharge to card payments. The Reserve Bank designed the change to save consumers money. Early evidence suggests that in hospitality, much of the cost is moving rather than disappearing. For pubs, clubs and hotels, where card payments dominate the till, the question is what to do with it.
What the ban was meant to do
The Reserve Bank said the old system was no longer working as intended because surcharges had become increasingly hard for consumers to avoid. It says only about 16 per cent of businesses were surcharging, and that the reform was designed to cut card acceptance costs, particularly for small businesses. It has estimated the changes will save businesses $910 million a year in reduced transaction fees. According to figures reported by Hospitality Magazine, the ban was expected to save consumers a combined $1.6 billion, or about $80 a year for each card user.
However, businesses still pay to accept cards. If they cannot recover the cost at the point of payment, they must absorb it, offset it or build it into prices.
Early signs in hospitality
Within a week, Small Flat White, a platform tracking coffee prices across more than 1,500 cafes, found that about 17 per cent were charging more for a flat white than before 1 October. The typical rise was 50 cents, or almost 10 per cent of the price, well above the 0.5 to 1.5 per cent surcharge customers used to pay on card transactions.
Wes Lambert, chief executive of the Australian Restaurant and Cafe Association, says most cafes and restaurants have raised prices in some way, whether through menu prices or higher weekend and public holiday surcharges. He says some businesses have moved to cash-only trading or bank transfers, and warns that higher prices can affect demand. In Hobart, Thai restaurant owner Avtar Singh told the ABC he was absorbing the cost for now but expected to raise prices eventually, saying small businesses already run on very thin margins.
A survey of more than 250 small businesses by lender OnDeck Australia found that 69 per cent of hospitality operators expect their costs to rise, 51 per cent plan to lift prices and 65 per cent are worried about the impact over the next 12 months. Only 23 per cent of all respondents plan to absorb the extra cost. OnDeck CEO Cameron Poolman says the rules shift the cost rather than remove it. OnDeck is a lender, so its survey is best read as a snapshot of sentiment.
Economists see limited broader impact. Luci Ellis, Westpac’s chief economist, says bundling the old surcharge into prices is a one-off change and not inherently inflationary, though she notes most reports of price rises above the old surcharge came from hospitality.
A sector already stretched
The ban arrives when margins are thin. According to CreditorWatch figures reported by the ABC, one in eight restaurants and cafes closed between July 2025 and July 2026. John Hart, national president of Restaurant and Catering Australia, says average net profit was around 10 per cent a generation ago and had fallen to 2.5 per cent by the end of 2025. CreditorWatch chief economist Ivan Colhoun describes the pressure on small operators as a cost-of-doing-business crisis, and notes that even if inflation slows, prices do not fall, they simply rise more slowly. A Ballarat cafe operator, Frazer Wyley of Prey, has pointed out that once the cup, wages, super, ingredients and card fees are counted, the margin on a cup of coffee can be less than 10 cents. At Claret Club in Sydney’s Darlinghurst, co-owners Bridget Raffal and Harry Hunter say their biggest issue is cost-of-living pressure that keeps customers away, and that they need more people through the doors.
Know your numbers…
Know your numbers. Work out what card fees now cost you each month, as a percentage of takings and per transaction. Then decide where that cost will sit.
Test price changes carefully. The average rise in coffee shows how quickly a small surcharge can turn into a larger menu increase. Consider adjusting items that are less price-sensitive, or reviewing high-volume lines like schooners and mid-strength beers, rather than raising everything.
Check your payment terms. Ask your provider about your merchant rates and whether a cheaper plan or a different terminal suits your volume. Small differences add up across thousands of transactions.
Think about value, not just price. Midweek deals, bundled meal offers and loyalty perks can help keep visit frequency steady while prices adjust.
Be clear with customers. A short sign or menu note explaining that costs have changed can reduce complaints, and avoid cash-only rules that put off regulars.
Sources
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ABC News, “Coffee prices at some cafes rise 10pc after Reserve Bank imposes card surcharge ban” — https://www.abc.net.au/news/2026-10-07/coffee-prices-increase-up-to-10-per-cent/107237680
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Hospitality Magazine, “Hospitality businesses feeling pressure from recent card surcharge ban” — https://www.hospitalitymagazine.com.au/hospitality-businesses-feeling-pressure-from-recent-card-surcharge-ban/
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ABC News, “Small businesses fighting to stay open amid ‘insidious cost creep’” — https://www.abc.net.au/news/2026-09-09/rising-cost-of-business-challenging-country-towns-surcharge/107116412
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ABC News, “‘Did we do well today?’: This is what it takes to keep an independent restaurant open” — https://www.abc.net.au/news/2026-10-24/restaurant-bar-food-wine-eat-out-cost-of-living-independent/107293874
