The surcharge ban didn't remove the cost of card payments. It moved it, and small businesses are carrying it

Since 1 October, Australian businesses can no longer add a surcharge when customers pay by card on the major networks. For shoppers it is an easy win. The extra 1 or 1.5 per cent at the café or the mechanic has disappeared, and the Reserve Bank expects merchants to save hundreds of millions of dollars a year as the cost of accepting cards comes down.

For a lot of small business owners, the picture looks different. The surcharge was never profit. It was how they recovered a cost they still have to pay. Banning the surcharge does not make that cost go away. It moves it somewhere less visible: into prices, into margins, and eventually into what a lender sees when that business applies for finance.

What actually changed

Two things happened at once, and they pull in different directions.

The first is the surcharge ban itself. Businesses can still offer a discount for a cheaper payment method, such as cash or account-to-account payments, but they cannot add a fee on top for paying by card.

The second is a cut to interchange, the fee that card issuers earn every time a card is used. The cap on consumer credit cards is coming down from 0.8 per cent to 0.3 per cent. In theory, lower interchange means lower merchant fees, which is what the reform is counting on to offset the lost surcharge.

The theory works best for large merchants with negotiated rates and the volume to push their providers for every basis point. It works least well for the small operator on a flat-rate terminal plan, who has never negotiated a merchant fee in their life and may not see the saving passed on at all.

Where the cost goes

Take a small business turning over $800,000 a year, with most sales on card. At an all-in cost of acceptance around 1.4 per cent, that is roughly $11,000 a year in fees. Under the old rules, a surcharge recovered most of it. Now the owner has three choices.

They can absorb it, which comes straight off profit. For a business on a net margin of 5 to 10 per cent, losing a cost of that size is not a rounding error.

They can raise prices across the board, which means cash customers now pay for card customers. That is legal and often sensible, but it is a pricing decision many small owners put off because they are worried about losing customers.

Or they can renegotiate their payment setup. Moving off a flat-rate plan, checking whether the interchange cut is actually showing up in their merchant fees, and offering a discount for cheaper payment methods can recover a surprising amount. This is the option fewest owners take, mostly because nobody has told them it is there.

The part nobody is talking about: lending

There is a second-order effect that will not show up for a year or two. When a small business applies for finance, lenders increasingly assess it on bank statement data and recent financials. If margins have quietly fallen by a percentage point because card fees are now being absorbed, that flows straight through to the numbers a lender uses to decide how much the business can borrow.

A business that looked comfortably profitable in 2025 can look tighter in its 2027 financials without anything else changing. Owners who plan to borrow for equipment, vehicles or premises in the next couple of years should be looking at this now, while they can still adjust their pricing, rather than finding out from a smaller approval.

What happens to card rewards

The interchange cut also changes the economics of rewards cards. Interchange is what funds points, so a lower cap on consumer credit cards means less money for rewards. Several banks cut the value of their points when transferred to airline programs around the time the ban came in.

Business cards are treated differently. Their interchange cap stays at 0.8 per cent, so business rewards cards are likely to hold their value better than personal ones. For owners who have been running business spending through a personal rewards card, that is worth a second look, both for the rewards and for keeping business and personal finances clearly separated.

What small businesses should do now

Check your merchant statement. Find out what you are actually paying per transaction, and whether it has fallen since the interchange cut. If it has not, ask your provider why.

Work out your true cost of acceptance as a dollar figure for the year, then decide deliberately whether to absorb it, price it in, or offer a discount for cheaper payment methods. Doing nothing is also a decision, and usually the most expensive one.

Watch your margin in the numbers lenders will see. If you are planning to borrow in the next two years, small changes in profitability now will matter later.

A good reform with a small business blind spot
The surcharge ban is a sensible change for consumers, and lower interchange should, over time, bring down the cost of accepting cards. But reforms that work well on average can still land unevenly. Large merchants will negotiate their savings. Small businesses on default plans will mostly absorb the change and get on with it.

The cost of card payments has not gone away. It has just stopped appearing on the receipt. The businesses that come out ahead will be the ones that notice where it went.