Tap your card for a flat white this week and you might notice something odd. The little surcharge line on the receipt is gone. The coffee, though, costs more than it did last month.
No surprise there, really. The Reserve Bank banned card surcharges on eftpos, Visa and Mastercard from 1 October. A week later, some cafes have just baked the cost into the price.
About 50 cents more a cup
Figures reported by the ABC show about 17 per cent of cafes have bumped up their flat white since the ban. Usually by 50 cents. On a normal coffee that’s around 10 per cent.
The old surcharge was usually 0.5 to 1.5 per cent. Do the maths and plenty of customers are now paying more than they ever did in fees.
A few places have gone the other way and stopped taking cards at all. It’s cash, or pay by bank transfer.
Why the RBA did it
The RBA reckoned the old system was broken. Surcharges were getting harder to dodge, and you often didn’t see them until you’d already tapped.
Nobody liked them much. The RBA’s own research found 76 per cent of Aussies wanted them gone.
There was a second change too, and it got far less airtime. The fees banks charge businesses to process card payments, known as interchange fees, were also cut. The cap on personal credit cards dropped from 0.8 per cent to 0.3 per cent, and on debit cards from 0.2 per cent to 0.16 per cent. The RBA expects that to save businesses around $910 million a year.
American Express isn’t covered by the ban, so you may still see a surcharge there.
There’s more to come, too. Fees on foreign-issued cards will be cut from 2.4 per cent to 1 per cent from April 2027, which matters for cafes in tourist areas. Business credit cards stay at 0.8 per cent, though.
So on paper, lots of small businesses should pay less to take cards. The problem? The savings trickle in month by month. The surcharge money disappeared overnight.
Small businesses say the sums don’t add up
Cafe owners aren’t exactly celebrating.
Avtar Singh, who has a Thai restaurant in Hobart, told the ABC the government had to get that margins for small operators were already razor thin. “If you squeeze it any further, it’ll come to a point where doing business is very, very difficult.”
Wes Lambert, chief executive of the Australian Restaurant and Cafe Association, was blunter. “Ultimately, we think that the RBA kicked an own goal in this. They should have known better.”
Small venues pay more in card fees than the big chains and can’t haggle them down. Take away the surcharge, and the menu board is all that’s left.
Mind you, only about 16 per cent of businesses were surcharging in the first place. The rest had been quietly eating the fee all along.
Will it push up inflation?
Probably not, say the economists.
Westpac chief economist Luci Ellis called the price rises “a one-off, not inherently inflationary”. She said they shouldn’t have any effect on interest rates.
AMP’s Shane Oliver agreed the big-picture impact “may not be that significant”. Small business owners are copping the worst of it, in his view.
What it means for your morning coffee
One coffee a day, five days a week, plus 50 cents. That’s about $130 a year. Won’t break the bank, but it all adds up when everything else costs more too.
Points chasers, look out. Banks told the RBA they’d probably answer the lower fees by trimming rewards, lifting annual fees or charging more interest. That shiny rewards card might not look so shiny next year.
What happens next
The RBA isn’t saying any more for now. It does plan to look at Amex and buy now, pay later down the track.
In the meantime, have a look at the board next time you order. The surcharge might be off the receipt. The cost isn’t really gone, though.