Sunita Somvanshi
From October 1, 2026, Australian banks must stop charging customers a fee when they use credit cards. The Reserve Bank’s new surcharge ban will reshape how banks operate and how customers pay for goods and services.
When you pay with a credit card at a shop, that shop pays a fee to the bank—typically a percentage of the purchase. This fee is called an interchange fee. For decades, many businesses have recovered this cost by adding a surcharge to credit card transactions. Starting next month, that option disappears. The ban removes a key revenue stream for banks and forces them to rethink how they fund customer rewards programs.
The practical effect is significant. Customers are expected to save around $1.6 billion in fees because businesses can no longer pass these costs directly to them at checkout. But the squeeze falls elsewhere. Small businesses will absorb more of the card-processing costs themselves, and banks will have less money flowing in to fund the loyalty points and cashback offers they use to attract customers.
For some business owners, the shift is already prompting drastic changes. Simone Douglas, who runs the Duke of Brunswick and Port Admiral Hotel in Adelaide, says she’s considering abandoning credit cards altogether and going cash-only. Her establishments ran up an $80,000 card bill—a figure that encapsulates both the scale of how much card payments cost hospitality venues and the economics that have been quietly hidden in pricing for years. “We’ve built our reputation going against the grain,” she said, referring to past business decisions like gluten-free kitchens and a no-gambling machines policy. For her, a cash-only model feels like another way to stay independent, though customer reaction to that shift remains mixed.
Banks are racing to adapt. CommBank has already begun rebranding its rewards program, transitioning from CommBank Awards to CommBank Yello from September 29. The new program expands where customers earn points—now across eligible home loans, savings accounts, credit cards, and insurance products—and where they can redeem them, with partners including Woolworths, Myer, Velocity Frequent Flyer, Origin Energy, BP, and Virgin Australia. The shift reflects a broader industry reality: rewards need to be funded differently if interchange revenue drops.
The Reserve Bank’s reform marks the biggest shake-up in Australian banking for over two decades. Credit card balances have already begun dropping, and card numbers are retreating as businesses and customers adapt to a new payment landscape. Banks are adapting to the change, but they are clearly working to maintain profitability and customer loyalty as the old model shifts.
The outcome is a genuine redistribution of costs. Customers who rely on credit cards will benefit from lower fees. Small and medium-sized businesses—already running tight margins—face a tougher year as they absorb card-processing costs they once passed on. Banks will have to work harder to justify the rewards they offer. October 1 marks the end of an era where convenience and customer rewards were quietly funded by surcharges. What comes next is still taking shape.
