Australia , November 2, 2026 — When the Reserve Bank made card surcharges illegal as of October 1st, they were attempting to make paying for coffee easier for Australians. However, as it turns out, there was another result that came from this action. Many of those who own and run cafes have decided to raise their prices rather than absorbing the cost of losing the money that would have been generated by these fees. This is just one example of how a reform intended to lower consumer costs can be applied in very different ways than initially planned.
What the Surcharge Ban Changed
The policy change eliminated the 0.5 to 1.5 percentage point surcharges that businesses had previously imposed on customers for using credit cards, and reduced the interchange fees that merchants pay to banks. The Reserve Bank of Australia estimated that the policy changes would result in over $1 billion per year being saved by Australian consumers due to elimination of surcharge fees. In addition, credit card interchange fees were reduced from 0.8 percent to 0.3 percent as a result of the overall reform package.
Industry bodies had given prior warning of the impact of the ban on cards, indicating that those businesses with very low profitability (low margin) will probably make up for the loss of card usage in other areas. The Australian Restaurant and Cafe Association was concerned that the majority of hospitality businesses operate on low margins (between 2.6% – 3.1%), and therefore will find it difficult to accept card payments and not adjust their prices. Those warnings have come true in a large part of the industry.
How Much Prices Have Actually Risen
New data from coffee pricing service Small Flat White showed that approximately one out of every six of the cafes surveyed had increased the cost of their “flat white” after the ban on single-use plastics took effect. The average increase was approximately 50 cents. Thus, nearly 20 percent of those surveyed were forced to adjust their pricing within the first few weeks after the October 1st change. Additionally, some cafe owners have increased the costs associated with food purchases, as well as those associated with the coffee adjustments. For example, a cafe owner in Sydney stated he was planning to increase the price of his paninis by a dollar, along with adjusting his coffee prices.
Although there are other reasons why costs could rise (e.g., ingredient costs rising, wage hikes occurring, rent going up) since the ban on surcharges went into effect in January 2021, many of the price hikes that occurred during this time period were very close to the date the ban was implemented. Therefore, researchers who track prices have stated that while it is possible that some of these hikes were due to the ban on surcharges, it does not mean that the ban was responsible for all of the hikes.
Industry Reaction Remains Mixed
The reasons behind price increases by coffee shop owners vary widely; however, many of them are simply moving an expense that was once a single line item into the regular pricing of their menu items. For example, a coffee shop owner in Melbourne stated that the price increase is essentially covering what he would have had to collect through the credit card fee. On the other hand, there are other owners who argue that this price adjustment does not allow businesses to take advantage of the transition to profit.
Some cafés have kept their prices steady; many say that they didn’t charge extra fees to start with and therefore don’t need to change anything now. Operators of smaller businesses are particularly concerned about having to absorb the cost of credit card processing, while also having to do so without a clear way of recovering those costs. The conflict between simplifying pricing and recovering actual costs is one of the main issues being discussed throughout the restaurant business.
What It Means for Consumers
The net effect of the changes made to the system will most likely be positive, although it is possible that some customers who have traditionally paid credit card fees on a regular basis will see a small reduction in their overall cost as a result of these changes. In contrast, those customers who primarily used cash before the reforms were implemented may now be indirectly contributing to the costs associated with accepting credit cards through the increased prices of goods/services. The ACCC has stated that businesses are still able to raise prices to cover the costs associated with processing payments.
Consumers advocates believe that over the next few months we should see if price increases begin to stabilize or continue to climb upward, with additional cafes adjusting their prices. At this time, consumers checking their receipts may observe a simpler transaction with no visible surcharge line; however, the total amount paid by the consumer may still look similar to what he/she previously spent. As to whether this is the “savings” regulators originally stated would occur, is a topic of discussion among consumers and industry groups.
