An Opinion: Credit Card Surcharges

An Opinion: Credit Card Surcharges

We have previously reported the facts of the huge changes from 1 October 2026: Card Payment Surcharges to End from 1 October 2026 – HQB Accountants

In the past two weeks there has been a lot written about the ATO’s decision to ban payments via credit card, and their subsequent backflip under pressure. However, the real issue here is not the (commercially understandable) decision by the ATO – they are doing what receivers of payments such as businesses will need to consider doing under this new regime.  

The changes introduced on 1 October come at a time when:

1. Consumers have become used to a clear choice:
   1. Pay by credit card, enjoy the benefits of points that come with credit cards (e.g. Qantas), and the benefit of some time to pay back the bank. In return for this convenience, you accept that a business may seek to pass on what their bank charges them for that payment method, OR
   2. Pay by cash or direct credit, and you end up paying less (no surcharge).
   3. Result is that those that choose to use credit cards pay the cost incurred by businesses for that payment method – but they can choose a different payment method…

2. Inflation is a problem that the economy has been dealing with – inflation leads to cost-of-living pressures for the lower earning parts of society, and distortions of behaviours caused by prices rising quickly. Interest rates have just been raised again in September to try to deal with inflation, heaping more pain on households with mortgages.

So, if consumers aren’t paying surcharges anymore then does that mean the banks aren’t charging fees anymore? NO! For our business as an example, the bank has reduced card processing fees from 1.4% to 1.3%. It won’t surprise you that the bank is winning here. That means the big banks incur 0.1% of the ban, and businesses incur the remaining 1.3%.

My view of the credit card surcharge ban, is that the following will happen:

1. More consumers will choose to pay for EVERYTHING with credit cards where they can – why not when you can earn points on credit cards and there are now no surcharges. Banks will get even more processing fees than ever!
2. Businesses (many of whom are struggling to stay afloat at the moment) will be forced into a tough decision to try to maintain their profitability by:
   1. Banning credit card payments completely or on bigger payments, risking upsetting customers, OR
   2. Absorbing the cost of the bank charges that they used to be able to pass on. This means that they will need to raise prices for EVERYONE (not just those that want to pay by card). This is inflationary and could force more upward pressure on interest rates.

The RBA argues that removing surcharges will simplify payments and improve transparency for consumers. That may be true at the checkout, but it ignores an important economic principle: when the cost of a particular payment method is spread across all customers, those using cheaper payment methods effectively subsidise those choosing more expensive ones.

My view is that the ban won’t help consumers at all. Instead, the cost of bank charges will simply have to be passed on in pricing to all of their customers. This takes away the old system where there was a choice as to which payment method you wanted to use (the credit card with a surcharge, or another method with no surcharge).

The surcharge has gone, but the cost remains. Now everyone gets to pay.

– James Davis

15 October 2026

This article is compiled as a helpful guide for your private information and is subject to copyright. We suggest that you do not act solely on the basis of material contained in this article because items are of general nature only and may be liable to misinterpretation in particular circumstances. We recommend that our advice be sought before acting on any of these crucial areas.