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Australia's ban on card payment surcharges has been in effect for little more than a week, but the changes are already creating headaches for some businesses and their customers.
Travel agents are warning that they may need to increase fees or restrict credit card payments, while the Australian Taxation Office (ATO) has delayed its own plans to stop accepting credit cards following backlash from small businesses.
And with businesses permitted to incorporate payment-processing costs into their standard prices, questions are being raised about how much consumers will actually save.
Travel Agents Refusing Credit Card Payments
The travel industry is among those particularly concerned about the new arrangements.
Unlike smaller everyday purchases, travel bookings can involve thousands of dollars, making even relatively modest card-processing fees significant.
According to reporting by The Australian, Brisbane travel agent Adam Ahmad, of Itineraries Travel Consultants, has confirmed his business will stop accepting credit cards because it cannot absorb the processing costs.
Other travel businesses are reportedly considering higher service fees or limits on credit card transactions.
For perspective, a 1.5% processing cost on a $15,000 holiday amounts to $225.
Previously, businesses could recover that cost directly from customers choosing to pay by card. Under the new rules, that option is no longer available for covered cards.
This creates a particular problem for travellers who prefer to use credit cards for large bookings, whether to manage their own cash flow, earn frequent flyer points or meet the spending requirements of complimentary credit card travel insurance.
As we explored in our earlier article on the surcharge ban and changes to travel insurance and rewards, some banks have already reduced card benefits, adding another consideration for travellers.
Will Businesses Simply Increase Prices Instead?
While the ban removes separate card surcharges, it doesn't eliminate the costs businesses incur when accepting card payments.
The Australian Competition and Consumer Commission (ACCC) confirms businesses can incorporate those costs into their overall prices.
For example, a business previously charging $100 plus a $1.50 card surcharge could instead charge everyone $101.50.
The credit card customer pays the same amount, but someone paying cash could end up paying more.
This raises questions about the cost-of-living benefits of the reform, particularly if customers using lower-cost payment methods effectively contribute towards credit card processing costs.
However, not every business will increase prices. The Reserve Bank's reforms also reduce certain card-processing fees, and some businesses may absorb the remaining costs.
Whether the intended savings are ultimately reflected in lower prices will depend on how individual businesses respond.
Government Backflips on ATO Credit Card Ban
Perhaps the most significant development came on Friday, 9 October, when the Federal Government intervened to delay the ATO's planned withdrawal of direct credit card payments.
The ATO had announced it would stop accepting credit card payments after 30 November 2026, citing the substantial cost of absorbing processing fees once surcharges were prohibited.
According to ABC News, the ATO estimated those costs could reach approximately $200 million annually.
The announcement prompted backlash from businesses that rely on credit cards to manage tax payments.
In a joint ministerial announcement on 9 October, the government confirmed the ATO would continue accepting direct credit card payments until 30 June 2027, with transitional funding provided to cover the costs.
The extension gives the ATO more time to consult with affected taxpayers and investigate alternative payment arrangements.
However, it is only a temporary reprieve.
Under the current announcement, direct credit card payments are still expected to be phased out after June 2027, although payments through third-party providers may remain available.
More Than Just Frequent Flyer Points
While the loss of credit card rewards has attracted attention, the ATO's decision also has significant implications for business cash flow.
Many businesses use the interest-free periods available on credit cards to manage the timing of payments and incoming revenue.
For example, a business may pay a BAS liability using a credit card while waiting for outstanding customer invoices to be settled.
Provided the card balance is repaid within the applicable interest-free period, this can provide valuable short-term flexibility without incurring interest.
Removing direct credit card payments could take away that option, potentially forcing businesses to use other funding arrangements or third-party payment providers that may charge additional fees.
The government's decision to delay the change provides additional time for consultation, but the longer-term implications remain unresolved.
Are Consumers Really Better Off?
The surcharge ban was intended to simplify payments, improve price transparency and reduce costs for Australian consumers.
There are genuine benefits, particularly where businesses can pass on savings from lower card-processing fees.
However, the response from parts of the travel industry and the controversy surrounding the ATO's proposed credit card ban demonstrate that the changes aren't without consequences.
For travellers, fewer credit card payment options could make booking holidays less convenient, particularly when card benefits or insurance eligibility depend on how a trip is paid for.
For other consumers, the concern is whether previously visible card surcharges will simply be incorporated into higher prices paid by everyone.
The question now is whether the promised savings will materialise, or whether some of the costs will simply be recovered in less obvious ways.
Have you noticed businesses increasing prices or changing their payment options since the surcharge ban began?
