Card Surcharge Ban 2025: What Small Businesses Need to Know

The Reserve Bank's about to ban card surcharges, and small business groups are going mental about it. The RBA reckons this will save consumers money, but business groups are worried merchants will just cop the fees instead of passing them on.

The plain English version

Right now, when you pay by card at most businesses, you might get slugged an extra fee, usually around 1-2% for credit cards, sometimes a bit for debit. That's the surcharge, and it's meant to cover what the bank charges the business for processing your payment.

Come 2025, the government's planning to ban those surcharges completely. Sounds good for customers, right? Pay the advertised price and that's it. But here's the thing: those bank fees don't just disappear. The business still has to pay them, they just can't pass them on to you anymore.

The RBA's argument is that competition will sort it out. Banks will lower their fees to compete for business. But business groups reckon that's wishful thinking, especially for smaller operators who don't have the clout to negotiate better rates.

Here's what actually happens with card payments: When someone pays by card, the bank takes a slice. For credit cards, it's usually 1-2% of the transaction. For debit cards, it's less but still there. Multiply that across thousands of transactions and it adds up fast.

3 things this means for your business

1. Your margins are about to get squeezed harder. If you currently surcharge cards and can't after 2025, those fees come straight out of your profit. On a $100 sale with a 2% card fee, that's $2 less in your pocket. For a business doing $500k a year with 80% card payments, we're talking about $8,000 in extra costs.

2. You'll need to build card fees into your base prices. The smart move is to factor card processing costs into your standard pricing. Yeah, cash customers end up subsidising card users, but that's better than eating the fees yourself. You might need to bump prices by 1-2% across the board.

3. Cash discounts become more attractive. Instead of card surcharges, you could offer cash discounts. Same result, different framing. "5% off for cash" instead of "5% card fee". Customers love feeling like they're getting a deal.

What to actually do about it

First up, work out exactly what card fees are costing you now. Most payment providers give you monthly statements breaking down transaction fees. If you're not tracking this, start. You need to know the real cost before you can plan around it.

Next, talk to your payment provider about better rates. Yeah, the RBA hopes competition will drive fees down, but that won't happen automatically. Shop around, especially if you're processing decent volume. Providers like Square, Stripe, and traditional banks all have different fee structures.

Consider changing your pricing structure. If card fees are going to hit your margins, you need to recover that cost somehow. That might mean slightly higher menu prices, service fees that apply to all customers, or cash discount programs.

For online businesses, this is even trickier. You can't really do cash discounts for web sales. Building card fees into your pricing becomes essential. Your web design and checkout process might need updating to handle new pricing structures.

The timing matters too. Don't wait until the ban kicks in to adjust. Start planning now so you can implement changes gradually rather than shocking customers with sudden price jumps.

And here's a thought: this might actually level the playing field a bit. Big retailers who could absorb card fees easier than you won't have that advantage anymore. Everyone's in the same boat when it comes to building those costs into their pricing.

Look, the card surcharge ban isn't necessarily bad news, but it's definitely a change that needs planning. The businesses that get ahead of it will be fine. The ones that ignore it until 2025 might find themselves in a tight spot.

If you're not sure how this affects your specific setup or need help working through the numbers, that's exactly the kind of thing I help local businesses with. No point making pricing changes in the dark when a bit of planning can save you heaps down the track.