The Reserve Bank’s proposal to scrap all debit and credit card surcharges from mid-2026 has sparked sharp debate across the hospitality sector, with restaurant owners questioning whether the reform will really deliver the savings promised or just shift costs out of view.
Under the draft plan, merchants would no longer be allowed to recover the cost of card transactions from customers. These charges currently sit at around 1 to 1.5 percent per purchase. Instead, the RBA wants card networks to lower interchange fees, publish wholesale rates, and do away with surcharge practices it sees as outdated. The aim is to save Australians $1.2 billion a year.
But owners say the reality on the ground is more complicated.
“We usually have a sign that tells customers there’s a surcharge if they pay by card,” said Sachin Garg, owner of Shiva Indian Cuisine in Prahran and founder of Sachin Garg Catering. “We give them the choice. If they want to avoid the extra charge, they can pay by cash. But if they choose to use a card, they have to bear the cost of using that facility.”
Garg says the real pressure comes with volume. “If you’re only doing ten transactions a day, the fees don’t add up to much. But when you’re processing a hundred transactions a day, every day of the year, it starts to hurt. That’s when it becomes a real problem for small businesses like ours.”
He compares the current model to budget airlines. “It’s like booking a Jetstar flight. You get cheap base prices, but then have to pay extra for things like food or luggage. That works for people who don’t want the extras. But in our case, there’s no way around it. We have to pay the bank for every card transaction, whether the customer wants extras or not.”
Garg is cautiously optimistic that if fee structures change, the proposal could benefit both customers and businesses. But many others remain wary.
The Australian Restaurant and Café Association has warned that a blanket ban would remove price transparency. It argues that small operators will be forced to silently absorb costs or inflate prices to compensate.
Wes Lambert, ARCA’s chief executive, has described the policy as tone-deaf. “This proposal shifts the cost of payment infrastructure from the banks onto the smallest players in the economy.”
A former restaurateur agrees that the issue begins with how banks charge small businesses.
“Normally, it’s the processing bank that charges fees for each transaction,” said Atul Khore, who previously ran Masala Craft in Thornbury. “So for every card payment, the bank charges us a fee. As a restaurant, we end up charging that fee to the customer. If the bank is charging us high fees per transaction, we have no choice but to pass that on.”
Khore sees merit in the RBA’s intervention, but only if changes happen on both sides of the system. “If banks switch to a flat monthly fee instead of charging for every single transaction, whether there are five transactions or 500, and the card or deposit facility costs the same, then businesses have no reason to charge customers extra. That’s the key point.”
The proposal has received vocal support from politicians including Treasurer Jim Chalmers and Labor MP Jerome Laxale, who has called surcharges a rort. On social media, many customers have expressed frustration about being charged to access their own money.
But business owners say the frustration should be directed at transaction fees themselves, not the visibility of them.
“Right now, you see many small businesses charging surcharges for transactions under five or ten dollars, or for using certain cards like American Express,” said Khore. “That’s because the bank passes those fees to them, and then the businesses pass them on to customers.”
He believes the fix lies in structural change. “To make it fair, the changes need to happen on both ends. Banks need to stop charging excessive transaction fees, and then small businesses will stop charging customers. In the end, it’s the customers who benefit.”
The RBA says it will press forward unless card networks act voluntarily. The federal government has backed a January 2026 deadline for banning debit card surcharges and has allocated $2.1 million to the ACCC to monitor excessive charges.
Back in Prahran, Garg is keeping a close eye on what comes next. “If they make card payments cheaper for us on the back end, then yes, we’ll stop surcharging. But right now, it’s the only way to stay afloat.”
For small businesses juggling wage rises, insurance, rent and energy bills, this isn’t just a policy change. It’s another cost that could be harder to explain when it’s no longer visible.
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