Australian Businesses Must Review Card Processing Costs After the Surcharge Ban

What changed on 1 October 2026?

The Reserve Bank of Australia removed its restriction on card networks introducing no-surcharge rules. From 1 October 2026, eftpos, Mastercard and Visa introduced rules that generally prohibit businesses from adding a separate fee because a customer pays by card.

The changes cover credit, debit and prepaid cards, including:

• Payments made in store
• Online card transactions
• Domestic and foreign-issued cards
• Payments between businesses, unless an exemption applies
• Card payments collected through invoices and payment links

American Express and UnionPay also removed surcharging from 1 October. PayPal's no-surcharge rule commenced on 5 October 2026.

The Reserve Bank does not directly regulate merchants under these changes. The requirements operate through individual card network rules. Exemptions may apply where permitted by a network's rules or by law.

Further information is available in the Reserve Bank's card surcharge FAQs.

Card processing fees haven't disappeared

Businesses still pay merchant fees when customers use cards. The changes remove the ability to recover those costs through a separate card surcharge on the affected networks, not the underlying cost of processing payments.

For businesses that already absorbed their card fees, there may be little immediate change beyond checking that payment systems comply with the new requirements.

Businesses that previously passed on those costs now need to decide whether to absorb them, recover them through advertised prices or reduce their payment expenses.

Even relatively small processing fees can become significant at scale. For example, a business processing $2 million in annual card sales would incur $20,000 in card fees at an effective rate of 1%.

That $20,000 represents the total processing cost, not necessarily the additional cost created by the surcharge ban. The financial impact depends on how much surcharge revenue the business previously collected and whether its merchant fees have decreased.

Absorbing card fees should be a calculated commercial decision, not an expense that gradually reduces profitability without being measured.

Your merchant fees may have decreased. Check whether they have

Alongside the surcharge changes, the Reserve Bank introduced lower interchange fee caps for domestic cards.

Interchange is the fee paid by a merchant's payment provider to the cardholder's bank when a transaction is processed. It forms one component of the total fees businesses pay to accept card payments.

From 1 October 2026:

• The interchange cap for domestic consumer credit cards fell from 0.8% to 0.3% of transaction value.
• Domestic debit and prepaid card interchange is capped at 8 cents or 0.16% of transaction value, whichever is lower.
• The existing 0.8% interchange cap remains for domestic commercial credit cards.

These are interchange caps, not the total merchant fees charged to businesses. Payment providers may also charge for payment processing, network services, terminals and other services.

The Reserve Bank expects smaller businesses to benefit from the reforms because they have historically paid interchange fees closer to the previous caps. However, lower interchange fees do not guarantee an equivalent reduction in the rates charged by your payment provider.

Your merchant pricing plan determines how visible those savings are and how much of the reduction reaches your business.

Single-rate versus unblended payment plans

Different merchant plans can carry substantially different costs.

According to the Reserve Bank's March 2026 review, small merchants pay the following average card acceptance rates:

Despite the difference, only 19% of small merchants use unblended plans.

Single-rate plans typically charge one percentage across different card transactions, making monthly costs straightforward to understand. However, the rate may not fall automatically when underlying interchange costs decrease.

Unblended and interchange-plus plans generally show the underlying interchange component more directly. Changes to interchange rates can therefore be easier to identify, although providers may still apply other fees.

These are averages across different businesses, not a guarantee that switching payment plans will save 0.5 percentage points. Your transaction volume, card mix and provider fees determine the actual result.

Ask your payment provider for a breakdown of your current fees, confirmation of any changes since 1 October and a comparison of the available pricing plans.

Calculate your actual card acceptance rate

Before changing prices, work out how much your business pays to process card transactions.

Start with your last three months of merchant statements. Add up your card processing fees and divide them by the value of your card sales over the same period.

Effective card acceptance rate = Total card processing fees ÷ Total card sales × 100

Include relevant recurring processing and terminal charges when assessing your complete payment costs. Keep the calculation consistent when comparing providers or historical periods.

If our virtual management accounting team already manages your reporting, we can help calculate this rate and identify changes in your payment costs.

Example: A café with $600,000 in annual turnover

Consider a café with annual turnover of $600,000, with 90% of sales paid by card.

That gives the business $540,000 in annual card transactions.

At these illustrative rates, the lower-cost plan would save the café $2,700 a year before any menu or pricing changes.

Actual savings will vary. The Reserve Bank's figures represent average costs across different businesses and plans, not two guaranteed quotes for the same café.

Nevertheless, the example shows why reviewing merchant fees should come before automatically increasing prices.

Calculate how much surcharge revenue you need to replace

Your total card acceptance cost and the additional cost created by removing surcharges are not necessarily the same.

For the café in our example, annual card fees of $4,860 represent approximately 0.8% of its total $600,000 turnover. That is equivalent to around 4 to 5 cents on a $5.50 coffee when spread proportionately across all sales.

However, the actual financial gap depends on the surcharge revenue the café previously received.

To calculate that gap:

1. Identify the total card surcharge revenue collected over a representative period before 1 October.
2. Calculate the merchant fees your business paid during that period.
3. Compare your current fees with those charged before the interchange reductions.
4. Determine how much surcharge revenue has been lost and how much of that loss is offset by reduced merchant costs.
5. Use the resulting figure to decide whether a pricing change is necessary.

For example, if the café previously recovered $6,000 a year through surcharges and subsequently saved $1,000 in merchant fees, the resulting annual gap would be approximately $5,000, assuming sales volume and payment behaviour remained unchanged.

That is the amount the business would need to address through pricing, lower expenses or improved margins to maintain its previous financial position.

Do not assume that a previous 1.5% card surcharge means every product now needs a 1.5% price increase.

Four ways businesses can manage card processing costs

Once you've calculated the actual financial impact, you have four main options.

1. Absorb the additional cost

Absorbing card fees may be practical if your margins can accommodate the expense or lower interchange costs offset part of the lost surcharge revenue.

However, the decision should be based on your operating margins, transaction volumes and cash flow, rather than simply leaving prices unchanged.

For businesses already operating on narrow margins, absorbing additional costs without reviewing profitability may reduce the funds available for wages, inventory, reinvestment and business growth.

2. Incorporate the cost into advertised prices

Businesses can account for card payment expenses within their advertised prices rather than applying a separate fee at checkout.

Before increasing prices, consider:

• What percentage of customers pay by card?
• What is your actual effective card acceptance rate?
• How much have your merchant fees changed since 1 October?
• Which products or services have the strongest contribution margins?
• Which products are most sensitive to price changes?
• Can selected prices be adjusted without changing your entire range?

A small adjustment across all products may be the easiest option for businesses with simple price lists. Where appropriate, use straightforward prices rather than awkward increments, such as moving a $5.50 item to $5.60 rather than $5.55.

Other businesses may benefit from reviewing premium products, upgrades or optional services instead of changing the prices of their most competitive items.

3. Review your product, service and customer mix

The surcharge ban may expose products, services and customer arrangements that were already operating on very slim margins.

Review:

• Minimum order values
• Low-margin products and services
• Fixed-price packages
• Subscriptions and recurring billing arrangements
• High-volume, low-value transactions
• Contracts that cannot be repriced immediately
• Premium products, upgrades and add-ons

Assess each product or service by its contribution margin, not simply sales volume. A popular product may contribute relatively little profit after labour, materials and transaction costs are included.

Improving the mix of products and services you sell can sometimes recover more margin than a general price rise.

Our business advisory services include pricing, profitability and margin reviews to help businesses identify these opportunities.

4. Reduce your payment processing costs

Before passing additional expenses into your prices, check whether you're paying competitive merchant fees.

Review:

• Your current merchant statements and effective rates
• Fixed monthly account charges
• EFTPOS terminal rental and equipment costs
• Individual transaction processing fees
• Domestic versus international card charges
• Consumer versus commercial card fees
• Costs across different payment channels
• Whether your plan suits your transaction volume and card mix

Compare providers using your actual transaction data rather than advertised headline rates alone.

The Reserve Bank's reforms also introduce greater fee transparency, which should help businesses make more informed comparisons between payment providers.

Businesses may also encourage customers to use lower-cost payment methods by offering discounts. The Reserve Bank confirms that payment-method discounts remain permitted, subject to applicable pricing and consumer law requirements.

Check the actual costs before offering a discount. Cash has handling, reconciliation, security and banking expenses and may not be cheaper than cards for every business.

Foreign-issued cards remain more expensive to accept

Businesses serving international visitors or overseas customers need to pay particular attention to foreign-issued card fees.

The Reserve Bank previously estimated that accepting foreign-issued cards costs Australian merchants around 2.5% of transaction value on average, substantially more than domestic card transactions (RBA).

Foreign-issued cards account for approximately 3% of Australian card transactions but around 20% of interchange fees paid by merchants (RBA).

New interchange caps for foreign-issued cards are scheduled to begin on 1 April 2027. Until then, businesses may continue facing higher processing costs on these transactions without being able to add card surcharges on the affected networks.

This is particularly relevant to tourism, hospitality, accommodation and online businesses.

For example, the Mornington Peninsula, where Achieve is based, attracted 7.9 million visitors in 2024, with visitors spending $1.8 billion locally (Mornington Peninsula Business). Businesses in tourism-dependent areas should consider both domestic and foreign-issued card fees when reviewing their summer trading costs.

Check your merchant statements to identify how much foreign-issued transactions contribute to your total payment expenses.

You cannot rename a card surcharge as an administration fee

Calling an existing card surcharge an "administration fee", "processing fee" or "convenience fee" does not necessarily make it compliant.

If the fee is charged specifically because a customer pays by card, it remains a card payment surcharge, regardless of the name.

Genuine delivery fees, booking fees, weekend surcharges, public holiday surcharges and fees for separate services may remain permitted, provided they comply with applicable consumer laws.

The distinction is whether the charge relates to an actual service or operating condition, rather than the customer's choice to pay by card.

For example, a clearly disclosed Sunday surcharge that applies to all customers regardless of payment method is different from a processing fee applied only when a customer uses a card.

The surcharge changes also apply to business invoices

The changes are not limited to customer-facing retail transactions.

Card payments between businesses are generally subject to the new rules unless the relevant card network or law provides an exemption (RBA).

If you're a tradesperson, supplier, consultant or professional services business that previously added card fees to invoices, review your payment arrangements.

Check:

• Invoice templates
• Online payment links
• Accounting software payment settings
• Recurring invoices and subscription billing
• Customer contracts containing payment surcharges

Importantly, an invoice issued before 1 October may still be affected if the customer pays by card after the changes took effect.

Our accounting and tax team can help review your invoicing processes and related GST settings.

Remove card surcharges from your payment systems

Many payment providers have removed or disabled surcharge functions automatically. However, businesses should confirm that old surcharges are no longer applied or displayed across every relevant payment channel.

Review:

• EFTPOS terminals and point-of-sale systems
• Online checkouts and payment gateways
• Online payment links
• Recurring billing and subscription systems
• Booking engines and accommodation platforms
• Invoicing software and templates
• Websites, menus and price lists
• Customer-facing signage
• Terms and conditions
• Contracts containing card payment fees

Run a test transaction through each relevant payment channel to confirm old card surcharges have been removed.

If your point-of-sale, booking or payment system connects directly to Xero, check that obsolete surcharge income lines, transaction rules and automated payment settings have also been updated.

Our cloud accounting services team can help ensure the accounting side of your payment systems is correctly configured.

Tell customers about any pricing changes

Removing card surcharges is a positive change for customers. Communicate it clearly.

If your business also adjusts its advertised prices to account for payment costs, explain those changes rather than leaving customers to discover them at checkout.

A simple message might be:

"We've removed card surcharges and adjusted a small number of prices to reflect our payment and operating costs."

Clear pricing helps customers understand what they will pay before making a purchase.

What happens next with the RBA's payment reforms?

The surcharge ban is one part of a broader package of Reserve Bank reforms intended to reduce merchant card payment costs and improve transparency.

Further changes are scheduled for:

• 30 October 2026: Designated card networks and large acquirers begin publishing specified information about card payment fees.
• 30 January 2027: Large acquirers begin publishing information on how interchange fee reductions have flowed through to merchant service fees.
• 1 April 2027: New interchange caps apply to foreign-issued card transactions acquired in Australia, and all acquirers must provide more detailed merchant statements, directly or through payment facilitators.

These requirements should make it easier for businesses to compare providers and assess whether lower interchange costs are reaching merchants.

See the RBA's implementation timeline for the full details.

Card surcharge ban FAQs

Can businesses still charge credit card surcharges in Australia?

Businesses generally cannot add card surcharges to payments on eftpos, Mastercard and Visa networks from 1 October 2026, subject to applicable exceptions. American Express and UnionPay also removed surcharging from that date, and PayPal followed on 5 October 2026.

Can businesses still charge a Sunday or public holiday surcharge?

Yes. Weekend and public holiday surcharges are separate from card payment surcharges. They can remain where they comply with applicable consumer laws, are properly disclosed and are not charged solely because a customer pays by card.

Can I replace a card surcharge with a processing or administration fee?

No, not where the fee is charged because a customer pays by card and the transaction is subject to a no-surcharge rule. Renaming the fee does not change its purpose. Genuine fees for separate services are different.

Can I increase prices to recover card processing costs?

Yes. Businesses can incorporate payment processing expenses into their advertised prices, subject to applicable pricing laws. Calculate your actual additional costs before deciding how much to increase prices.

Can I offer customers a discount for paying cash?

Yes. The Reserve Bank confirms businesses can offer discounts for particular payment methods. Ensure the price display and discount comply with consumer law, and check whether cash is genuinely cheaper once handling and administration costs are included.

Do the surcharge changes apply to business invoices?

Generally, yes. Card payments between businesses are covered unless an applicable network rule, law or regulation provides an exemption. Payments made after 1 October 2026 may be affected even when the invoice was issued earlier.

Do the rules cover international credit cards?

Generally, yes. The no-surcharge rules apply to foreign-issued cards on the affected networks, subject to any applicable exceptions. New interchange caps for foreign-issued card transactions begin on 1 April 2027.

Will merchant processing fees automatically decrease?

Not necessarily. Lower interchange caps can reduce some underlying costs, but the amount passed on to businesses depends on their payment provider, pricing plan and transaction mix. Review your current merchant statements and request a breakdown of any rate changes.

Review your card processing costs before increasing prices

The removal of card surcharges does not mean every business needs to increase prices by the percentage it previously charged customers.

Start with your actual merchant fees, the surcharge revenue you've lost and the margin your business needs to maintain.

Achieve Business & Financial Solutions has helped business owners understand pricing, profitability and cash flow since 1989. Based in Mornington, our team works with businesses across the Mornington Peninsula and greater Melbourne.

Through our business advisory services, we help owners assess operating costs, review margins, improve cash flow and make informed pricing decisions.

If your business previously charged card surcharges, or you're unsure whether your merchant fees are competitive, book a complimentary 30-minute discussion with Wayne.

We'll help you identify the financial impact, assess your current card acceptance costs and determine the most appropriate next steps for your business.

Book a complimentary 30-minute discussion

Or call 03 8560 2239 or email hello@achieve-solutions.com.au.

About the author

Wayne Lock founded Achieve Business & Financial Solutions in 1989. He helps business owners grow their businesses, strengthen their financial foundations and build lasting wealth. Wayne co-authored 101 Strategies for Business Owners to Save Tax and presents online and in-person workshops on business and financial success. Read more about Wayne.

About Achieve

Achieve Business & Financial Solutions is a business advisory and accounting firm based in Mornington, serving businesses across the Mornington Peninsula and Melbourne metro. Explore our full range of business solutions. Achieve is a Xero Certified Advisor.

This article provides general information only and does not take your personal circumstances into account. Speak with us before acting on it.

Sources and further reading

• Reserve Bank of Australia: Card surcharge changes and FAQs
• Reserve Bank of Australia: Competition in card acquiring services
• Reserve Bank of Australia: Interchange fees
• Reserve Bank of Australia: Surcharging
• Reserve Bank of Australia: Issues Paper
• Reserve Bank of Australia: Payment reform announcement
• PayPal: Policy updates
• Mornington Peninsula Business: Tourism research and insights