The RBA has officially decided to ban card surcharges in its RBA conclusion paper here. This means that come October 2026, you will no longer be allowed to charge a surcharge for Debit and Credit Card purchases. However, you will still be able to offer a cash discount.

Key Takeaways

• The surcharge ban is a new federal rule starting in October 2026 that prevents retailers from charging extra checkout fees.
• Many will, as a result, see their Profit margins shrink on fixed-price goods, e.g., magazines, lotto, etc
• Interchange fee caps will drop, helping lower the wholesale cost you pay banks for card processing.
• Cash discounts are still completely legal and offer a smart way to avoid card fees.
• POS software gives you the power to update prices in bulk and track your exact margins in real-time.
• Premium cards, the RBA claims that the fee gap between debit and credit cards will be reduced.
• The RBA has asked for clearer transparency rules on hidden bank fees.
• You can still reject American Express

What is the 2026 RBA Surcharge Ban?

The 2026 RBA Surcharge Ban is a federal rule that takes effect in October 2026 and prevents Australian retailers from adding surcharges to card payments at checkout. This new rule forces business owners to pay the full cost of card processing out of pocket. For example, if a customer buys a $10 notebook with a rewards credit card, you cannot add a 1.5% fee to cover the extra credit fees charged by the bank.

Next, the RBA mandated a reduction in one of the bank fees (interchange fees) to help businesses cope. Interchange fees and scheme fees are the hidden wholesale costs that your bank and the card networks charge you to process every electronic transaction. When a customer taps their card, the payment network takes a tiny slice of the sale before the money hits your account. For instance, Visa and MasterCard charge a fee just to use their global networks to verify that the customer has enough money. This should reduce some of the fees merchants are charged.

Also, by forcing banks to publish these fees, the RBA hopes to increase competition. If you know exactly what your bank charges compared to other banks, you can negotiate a much better deal for your store.

Did the RBA Fix the Gap Between Small and Large Merchants?

The RBA claims to close the gap between small and large merchants by strictly limiting the maximum interchange fees banks can charge. You will need to actively check your merchant statements to ensure your bank actually passes these savings down to your account. Do not assume your bank will automatically lower your bill.

The problem of Premium Credit Cards

These cards affect your margins by imposing significantly higher processing costs. Soon, you will no longer be able to recover via a checkout surcharge. RBA thinks that lowering interchange fees will help here, which it will, but only to a limited extent. I am sure merchants will end up having to keep paying for the lavish rewards programs attached to platinum travel cards. For instance, processing a basic debit card might cost you 10 cents, but processing a premium platinum card now costs you over a dollar for the same sale. If a customer tries to pay with a premium Visa or MasterCard, and your terminal can accept them, you must also accept their premium cards, even though they carry higher fees. Mind you, in reality, often you do not know until the transaction has gone through whether it is one of these cards.

American Express

You have complete control over whether you accept American Express. If you feel their rates are too high to match the new 2026 realities, you are entirely within your rights to put up a 'No Amex' sign and turn it off on your POS system.

Will the Surcharge Ban Cause Retail Price Inflation?

The surcharge ban will cause retail price inflation because shops must raise the cost of their goods to absorb the banking fees, which everyone agrees on. The RBA optimistically estimated that this policy would have only a tiny, 0.1%, one-off inflationary effect across the whole economy. We will see whether they are right.

How to Manage Fixed-Price Inventory

These are items where the merchant cannot change the fees. Products such as lottery tickets, newspapers, and phone credit do not offer flexibility for recovering absorbed bank fees. For example, if a magazine publisher prints a strict $9.95 price on the cover, you must swallow the card processing fee entirely. This needs to be addressed ASAP, as the solution proposed of keeping a fixed price item like a magazine at $9.95 but raising the price of a greeting card from $5.00 to $5.50 to balance your overall shop profit, is not workable in the current economic environment.

Why Are Cash Discounts the Best Alternative to Surcharging?

This is the only solution; cash discounts are completely legal price reductions offered to customers who choose to pay with physical notes and coins instead of cards. While the RBA banned card penalties, it openly supports offering price breaks to cash-paying customers. For example, you can price a hardcover book at $20 on the shelf, but program your till to give a 1% discount for cash. Our POS System can be set to do this automatically. Many customers will appreciate the savings. If you are going to do this, put a big sign up so everyone knows.

Automating Real-Time Margin Calculations

When new items, like gifts, come into the shop, you now need to factor in a percentage for bank fees into your pricing. Again, your POS System should be able to handle this automatically.

What Steps Should Retailers Take now?

Retailers must actively audit their current banking costs and overhaul their store pricing strategies long before the October deadline. Do not wait until the last minute. Follow these three steps to protect your store:

Call your bank: Contact your merchant facility provider today and demand a clear breakdown of your current fees. For instance, ask your bank exactly what percentage you pay for standard debit versus premium rewards credit cards. You need to know your baseline costs.

Audit your inventory: Review your stock to identify which high-margin items can safely handle a small price increase. For example, find your best-selling toys or gifts and plan a small price bump.

Fixed price items: You need to review these now. Ask your suppliers what they plan to do about your margins on these items.

FAQ
 

Q: What's the current status on the RBA banning card surcharges? Is it actually happening?
A: Yes, this is Labor policy and is almost certainly going to come into effect.

Q: Will cafes and shops just jack up the price of everything to cover the ban?
A: Yes, you will likely see the cost of card processing baked into the everyday sticker price of items, similar to GST. Some shops may adopt a discount-for-cash policy.

Q: Why don't they just cap the merchant fees as they do in Europe?
A: Good question, I think that is what they should have done. What many lobbied heavily for in Australia was a more targeted fix, of banning surcharges only on debit cards or low-value transactions, as New Zealand did. This was unfortunately rejected.

Q: Are weekend and public holiday surcharges getting banned too?
A: No, the RBA's proposed ban only targets payment processing surcharges, the 1% to 2% fee applied when tapping your card. Weekend and public holiday surcharges are legally separate and designed specifically to cover mandated penalty rates for hospitality and retail staff.

Q: Does the ban apply to both credit and debit cards, or just EFTPOS?
A: The changes aim to eliminate surcharges across all major networks, meaning it would apply to Eftpos, Visa, and Mastercard debit and credit transactions. The ultimate goal is to mandate that the price you see on the shelf or menu is the exact total you pay at the till, regardless of your card type.

Q: How are small businesses supposed to absorb these costs without going under?
A: You can ask your customers to support your local shops by selecting the Savings account, which routes the payment through the cheaper Eftpos network rather than Visa or Mastercard.

Q: Who actually benefits from this? Won't Visa and Mastercard just keep making billions?
A: Well, Visa and MasterCard are certainly winners, but to be fair, consumers will benefit from transparent, upfront pricing. 

Q: Why am I being charged a percentage fee for tapping when the technology costs the same?
A: A good question, as it costs as much to process a $1 transaction as a $100 transaction.

Q: Is this just a push to make us a cashless society?
A: I think so. 

Q: If a shop is still charging me a tap fee right now, are they breaking the rules?
A: No, it is still entirely legal for merchants to charge a card surcharge, provided it is not excessive and only covers their exact cost of acceptance. The ban only starts in October.  This gives retailers a transition period to adjust their pricing models and negotiate new merchant terminal rates with their banks.

Q: How are we supposed to absorb the high costs of premium credit cards without going under?
A: People are expecting a price rise as the actual cost of processing payments has not disappeared; most businesses will have to put these bank fees into their standard shelf prices.

Q: Why do big retailers like Coles and Woolworths get away without surcharging, but we get slammed?
A: Large retailers indeed process an enormous volume of transactions, so giving them the leverage to negotiate significantly lower merchant fees with the banks and card networks than smaller retailers who lack this bargaining power, but what I have noticed is that most of these retailers have quietly given up surcharging a while ago.

Q: Is the government doing anything to lower the actual merchant fees we pay to the banks?
A: Yes. Alongside the surcharge ban, the RBA is requiring banks to disclose previously hidden fees and is enforcing strict reductions on interchange fees. The RBA estimates that 90% of smaller businesses will be better off under the lowered wholesale caps, though most of us remain deeply sceptical.

Q: What happens if we just keep our surcharges active after October 2026?
A: Once the ban comes into full effect, applying a card surcharge will be a breach of consumer law. Non-compliant retailers will likely find that this is a matter for the courts.I would not suggest doing this.

Written by:

Bernard Zimmermann is the founding director of POS Solutions, a leading point-of-sale system company with 45 years of industry experience, now retired and seeking new opportunities. He consults with various organisations, from small businesses to large retailers and government institutions. Bernard is passionate about helping companies optimise their operations through innovative POS technology and enabling seamless customer experiences through effective software solutions.

The Reserve Bank of Australia (RBA) delayed its final decision on card payment reforms until March 2026. It is to allow more time to review submissions from businesses and the public. This extension means SMBs, including retailers, will keep using the current system longer, with surcharges helping to offset processing fees, which still frustrate many customers.

I've seen firsthand how card fees affect low-margin operations like corner stores and newsagents. Our company submitted detailed feedback to the RBA, emphasising that surcharges are strictly for cost recovery under the Australian Competition and Consumer Commission (ACCC) guidelines, and that removing them could shift the burden onto merchants rather than payment providers as claimed.

Reform Timeline and Key Impacts

The Labor Party's 2022 election pledge aims to eliminate debit card surcharges, reducing costs for consumers and small businesses.

October 2024: RBA review begins with a paper proposing bans on surcharges on domestic debit cards and some low-cost credit transactions, caps on interchange fees, and greater transparency.

15 July 2025: A consultation paper shows these fees, totalling $4.3 billion annually, are borne mainly by SMB retailers handling many low-value card payments as cash declines.

26 August 2025: The consultation closed, receiving many submissions, which delayed further analysis.

These reforms could reshape payment processing. It may require adjustments to the POS Systems setups.

Why This Matters for Your Business

• Cash is going, and cards now dominate
• The $4.3 billion in annual fees underscores the need for transparent, cost-effective payments.
• This delay extends uncertainty. Stay informed.

Let's see how it plays out.

Written by:

Bernard Zimmermann is the founding director of POS Solutions, a leading point-of-sale system company with 45 years of industry experience, now retired and seeking new opportunities. He consults with various organisations, from small businesses to large retailers and government institutions. Bernard is passionate about helping companies optimise their operations through innovative POS technology and enabling seamless customer experiences through effective software solutions.

I got many questions about my article here

Here are the four questions I received, which generated considerable interest across the Australian retail sector. I explain why I believe this planned policy change will significantly impact how businesses price their products and process payments. I also explain why I think those who disagreed with me are wrong.

1) The Legislative Pathway for Surcharge Abolition

I agree that Labor's commitment to abolishing debit card surcharges will probably require legislation. Now, it was and is Labor policy to abolish these surcharges. Recent polls show strong public dissatisfaction with surcharges on card payments. When I spoke to a senior official in the NAB, I was told 71% of Australians polled. I cannot find any evidence to back this up, but it sounds reasonable to me. This creates significant political pressure for action.

Despite those who argue that the current law blocks a surcharge abolition, I believe a Legislative Pathway for surcharge abolition exists. Labor to put it through will need support from the Greens or the LNP to pass such an abolition through parliament. The LNP and the Greens are now re-evaluating their positions overall as they both lost their leaders in the last election. But before the election, the LNP had stated that surcharges were symptoms of deeper problems in the payment system. Meanwhile, the Greens advocated removing surcharges, with the banks absorbing these costs.

Despite differing policies, there is a cross-party recognition that the current surcharge system needs to be examined and reformed.

2) Potential Impact on Retail Pricing Models

Implementing a surcharge ban, which looks likely, will necessitate adjustments to retail pricing strategies. Most retailers will try to incorporate the cost of debit card processing into their base pricing structure. For example, if your debit card processing cost averages 1%, a product priced at $5.95 would need to be adjusted to approximately $6.01 to maintain margins. There is a marketing problem with making a price of $6.01.

Then there is a bigger problem: this price adjustment creates an unfair challenge for smaller retailers as they typically face higher processing fees than their larger competitors. A supermarket with a 0.5% debit fee will probably keep the magazine at $5.95, while a newsagent with a 1.2% fee would need to charge $6.02 for the same item. This pricing differential highlights the inequitable nature of card processing fee structures across the retail sector today. This assumes the magazine companies are okay with this. The most likely scenario here is that the newsagent loses 1.2%. I doubt any of the three political parties will care about this newsagent.

So, I suggest retailers consider reintroducing cash discounts, equivalent to card processing costs, for customers paying with cash. Our POS System can do that.

3) Understanding Current Surcharge Regulations

There continues to be significant confusion regarding what costs can legally be included in card surcharges under existing regulations. The current interpretation of legislation permits businesses to include only direct costs associated with EFTPOS processing in their surcharges.

This means costs such as:

) EFTPOS terminal rental fees

) Transaction fees charged by payment processors

) Receipt paper for EFTPOS terminals

However, indirect costs cannot be incorporated into surcharges, including:

) Your accounting services related to payment reconciliation, even if done by an outside contractor.

) Internet connectivity costs for payment processing

) Electricity costs for running terminals

The banks will analyse your surcharge rate for you. Our study has revealed that many financial institutions do not comprehensively outline all eligible direct costs when advising merchants on appropriate surcharge levels. This results in businesses underrecovering their actual costs. Check here for details.

4) POS Software Surcharge Considerations

Some retailers use Point-of-Sale (POS) systems that automatically apply surcharges to cover electronic payment costs. We think these surcharges only comply with current regulations if the additional charge is displayed on shelf pricing before the customer reaches the checkout. Few businesses that use such POS systems do that; if your company employs such a system, it is advisable to confirm with your POS provider that your surcharging practices align with current regulatory requirements. Non-compliant surcharging may expose your business to regulatory action from the Australian Competition and Consumer Commission (ACCC). If you do ask them, please let me know their responses.

Conclusion and Next Steps

The proposed abolition of debit card surcharges represents a significant shift in Australia's retail payment landscape. While the exact timeline and implementation details await further political development, Labor is talking of early 2026

Suppose you have specific questions about how these changes might affect your retail operation or require assistance configuring your POS system to accommodate the new regulations. In that case, our team can provide tailored guidance and support. We remain committed to helping Australian retailers adapt to this evolving payment landscape.

Written by:

Bernard Zimmermann is the founding director at POS Solutions, a leading point-of-sale system company with 45 years of industry experience. He consults to various organisations, from small businesses to large retailers and government institutions. Bernard is passionate about helping companies optimise their operations through innovative POS technology and enabling seamless customer experiences through effective software solutions.

Although much of the election still needs to be sorted out, it is clear that now we need to consider the government's announced plan to ban debit card surcharges. It is set to take effect from January 2026. It is being presented as a measure to provide relief for consumers and a "fairer go". However, many of you do not see it this way. Many of you would feel that this will increase your costs, as we face it, it's the retailer that will now have to pay these debt charges. So, let's delve into what this change means, to consider the broader implications for your business.

We must speak here: Australia’s card payment system has, for a considerable time, been structured unfairly. Large national retailers, the supermarket giants and major department store chains, wield significant commercial power. This scale allows them to negotiate highly preferential, often rock-bottom, merchant service fee rates with the banks and international card schemes. Their sheer volume of transactions gives them leverage that an independent retailer cannot match. Currently, it's less of an issue than with cash; both independent and large organisations pay no fees to the bank on money. What makes it particularly bad is that in these government promises, there's no explicit, corresponding guarantee or mechanism announced to ensure that the bank charges the debt fees will be fair. This isn't anecdotal; this issue is acknowledged in reports from government regulatory bodies and industry analyses. On average, an SME business can expect to pay merchant fees for debit card transactions, sometimes two to three times more than what a major retailer pays for the same value and type of transaction.

To put this into perspective, a small business may see debit card fees ranging from 0.5% to 1.5%, and sometimes even more, particularly if newer or less typical card schemes are involved. Conversely, a large retailer might secure rates as low as a few cents flat per transaction, or a tiny fraction of a percent. For a $100 sale processed via a debit card, this disparity means a supermarket might incur a fee of just 20 or 30 cents. However, your local boutique, café, or specialty store could be charged $1.00, $1.50, or even more for that identical transaction. This difference isn't trivial.

Examining the Impact

Suppose the government proceeds with banning debit card surcharges without simultaneously legislating a significant and enforceable reduction in the underlying merchant fees that small businesses pay. In that case, the financial implications are pretty straightforward. The cost of accepting debit cards, which you can recover, will have to be absorbed directly by your business. For many independent retailers, this isn't a minor adjustment; it could translate into thousands, or even tens of thousands, of dollars in lost revenue annually, straight from your bottom line.

Let's consider the probable consequences under such a scenario. Prices are often set by suppliers in their RRP. I doubt that the suppliers will adjust their prices to these debit card increases. Then there is the problem of an item that says $4.95. You cannot increase it to $5.05, as inflation continues, you may be able to put the debt charges into the item, but certainly not immediately.

The other issue is that the surcharges explicitly show the consumer the bank fees; if this is hidden, as it will be in the government plan, what is to stop the banks from increasing it more? Debt fees now, compared to many countries, are high; what is to stop them from going up higher?

The Problem Lies with High Debt Fees

The fundamental challenge, which a ban on surcharging alone does not resolve, is the inherently unfair and often opaque structure of merchant service fees in Australia. Suppose the genuine policy objective is to create a more equitable financial environment for small retailers and deliver real savings. In that case, the primary focus must be on tackling these high debt fees. The proposal treats an effect rather than a cause. No one charges surcharges for cash, as it has no fees. The surcharge is there because of the debt charges.

A Call for Genuine Reform: What Should Change for True Fairness?

If the government is truly serious about fostering a fairer commercial environment, then the policy approach must be more robust. Simply shifting a visible cost (the surcharge) into an invisible, absorbed cost for the retailer doesn't solve the underlying problem of excessive debt fees.

We need a meaningful reform that ensures that banks and card schemes are compelled to offer more equitable and competitive rates to all businesses, regardless of their size. Any ban on surcharges, if it is to be fair, must be intrinsically linked with real, enforceable, and significant reductions in the cost of accepting card payments for all retailers. Without this linkage, the policy risks being perceived not as a measure of support, but as an additional financial impost on an already challenged sector, while letting the major banks and large retailers continue to operate with their existing advantages.

The coming months will be crucial as this policy develops. It is vital that small retailers' concerns are heard and acted upon to ensure a truly equitable outcome.

Written by:

Bernard Zimmermann is the founding director at POS Solutions, a leading point-of-sale system company with 45 years of industry experience. He consults to various organisations, from small businesses to large retailers and government institutions. Bernard is passionate about helping companies optimise their operations through innovative POS technology and enabling seamless customer experiences through effective software solutions.