Australia’s card surcharge ban forces cafes, shops into price increases
Ross Surace is preparing to raise the price of a coffee by 50 Australian cents and a panini by A$1 (US$0.70) when the country bans credit card surcharge fees starting on Thursday. The co-owner of Lennox Street Deli in Melbourne’s Moonee Ponds neighbourhood said bank-imposed card fees already cost his business more than A$1,000 (US$690) a week, even after the cafe recoups some of the expense by…
Australian cafes and shops face steep price hikes after the Reserve Bank of Australia (RBA) bans credit card surcharge fees starting Thursday. The co-owner of Lennox Street Deli in Melbourne's Moonee Ponds neighbourhood, Ross Surace, plans to raise coffee prices by 50 Australian cents and paninis by A$1 (US$0.70) to compensate for lost surcharge income, which currently exceeds A$1,000 (US$690) per week.
Other merchants may choose to absorb the additional costs, risking thin profit margins, or risk losing cash-strapped customers. The ban, one of the biggest changes to Australia's payments system in decades, comes at a challenging time for the retail sector, with higher wages, inflation, and weak discretionary spending. About 16% of Australian businesses currently surcharge, leading to annual consumer payments of A$1.6 billion (US$1.1 billion).
The change aligns Australia with the UK and European Economic Area, where surcharges on most consumer debit and credit cards are prohibited. The RBA aims to increase price transparency for consumers, but the impact will be most noticeable in cafes and restaurants, where margins are thin. Smaller businesses are more vulnerable to the changes, as they may struggle to pass additional costs to customers.
The RBA is mitigating the impact by reducing interchange fees, but the extent to which this counters the surcharge ban remains uncertain.
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