Sunita Somvanshi
The Hook
From October 1, Australian businesses can no longer add a surcharge when customers pay with a debit, credit, EFTPOS, or prepaid card. The Reserve Bank of Australia’s long-delayed rule changes the checkout experience for millions of consumers — but small businesses fear the costs will land squarely on them.
Core Facts
The Reserve Bank of Australia ended its prohibition on “no-surcharge” network rules, allowing card networks including EFTPOS, Mastercard, and Visa to enforce no-surcharge policies in merchant contracts. American Express voluntarily joined the change. The consumer credit card interchange cap falls from 0.80% to 0.30% — a 50 basis point reduction. Debit and prepaid card caps drop from 0.20% to 0.16%. Commercial credit cards remain unchanged at 0.80%. Commonwealth Bank announced it will reduce its flat merchant rate from 1.10% to 0.99% per transaction from October 1. Approximately 16% of Australian businesses currently apply card surcharges, including Aldi supermarkets, local grocers, cafes, restaurants, some tradespeople, and some online stores.
Consequence
For the small cafe, the local plumber, or the online retailer who currently adds a 1-3% card surcharge, the October 1 deadline means absorbing those costs or raising base prices for every customer. The RBA acknowledges businesses will still incur card processing costs and that “those costs can be reflected in a business’s overall pricing.” The Australian Restaurant and Cafe Association called the change “one of the largest in payments history” and warned many small businesses “are unprepared for its arrival.”
Depth Block
The RBA’s decision follows a lengthy review of Australia’s card payment system. When the RBA first effectively allowed card surcharges in 2003, Australians mostly paid in cash. By 2025, cash usage had fallen to 15% of payments by number, though it was still used for almost one in four purchases under $10. The RBA found “limited evidence that regulated-card surcharges still changed payment choices,” undermining the original rationale for allowing surcharges.
The interchange cap reduction is separate from the no-surcharge rule change. The 50 basis point cut in the wholesale interchange cap does not automatically translate into lower merchant fees. The RBA estimates that if all card surcharge costs were built into prices, it could add about 0.1% as a small, one-off impact on measured inflation.
Other surcharges survive the October 1 changes. Weekend and public holiday surcharges, booking fees, service fees, and taxi fare surcharges (regulated separately by states and territories) can continue. The Australian Competition and Consumer Commission warns businesses not to disguise card fees under another name.
PayPal’s no-surcharge rule starts October 5 — four days after the main change — creating a brief window where PayPal transactions can still be surcharged. UnionPay has also announced it will remove surcharging. By January 30, 2027, large acquirers must publish how interchange reductions reached merchant-service fees. Foreign-issued card interchange caps begin April 1, 2027.
Priority PAA
What is the new card surcharge law in Australia? From October 1, businesses cannot add a surcharge for debit, credit, EFTPOS, or prepaid card payments. The RBA ended its ban on no-surcharge network rules, allowing networks to enforce no-surcharge policies in merchant contracts. AmEx voluntarily joined. PayPal starts Oct 5, UnionPay also removing. Taxi card fees and weekend/holiday surcharges are exempt.
Closure
The October 1 surcharge ban removes a visible fee from the Australian checkout for the first time in over two decades. Whether consumers actually save depends on whether merchants absorb the interchange costs or pass them through higher prices. The RBA’s next test comes on October 30, when large acquirers and designated networks must publish specified fee data — the first real measure of whether the policy changes pricing behavior.
