Card surcharges are gone. The cost isn't.

The government's announcement says Australians will no longer pay around $1.6 billion a year in card surcharges.

It also says the broader payments reforms are expected to save businesses around $910 million a year through measures including lower interchange fee caps and greater transparency around merchant fees.

Those are significant numbers.

But I think a business owner reading that could reasonably come away thinking:

“If businesses are saving $910 million and customers are saving $1.6 billion, everyone wins and the cost has basically disappeared.”

That is not how I would look at it.

The Reserve Bank's own guidance says businesses will continue to incur costs for accepting cards.

It also says businesses can incorporate those costs into their overall pricing.

In fact, the RBA says that for customers shopping at businesses that previously imposed card surcharges, they may end up paying a similar amount overall — just through the advertised price rather than through a separate surcharge at the end.

That is an important distinction.

The surcharge has disappeared. The cost has not.

This is probably the main point I want business owners to take from this.

If your business previously recovered merchant fees by charging customers a card surcharge, I would not automatically stop charging it on 1 October and accept the reduction in margin.

I would work out what the number actually is first.

Suppose your business processes $2,000,000 a year through cards.

If your effective merchant cost is 1%, that is $20,000 a year.

At 1.5%, it is $30,000 a year.

If you were previously recovering most of that from customers and now you stop doing so, somebody has to absorb the difference.

Unless something else changes, that somebody is the business.

For a large retailer that might be manageable.

For a privately owned hospitality, trade or service business operating on a much smaller net margin, $20,000 or $30,000 can matter.

The first thing I would do is pull the last 12 months of merchant statements.

Don't rely on the advertised rate.

Work out what accepting card payments actually cost you.

Look at:

• total card transactions
• merchant service fees
• transaction fees
• terminal costs
• gateway fees
• any other payment-processing charges

Then calculate the effective cost as a percentage of the card revenue processed.

For example, if you processed $3,000,000 through cards and the relevant processing costs were $36,000, your effective cost was approximately 1.2%.

Now you have a number you can actually make a decision with.

This change is also a good reason to review your merchant provider.

The Reserve Bank is lowering some interchange fee caps and introducing more transparency around merchant payment costs.

That should put pressure on payment costs over time.

But I would not sit back and assume your existing provider will automatically hand every saving through to you.

The RBA itself is telling businesses to review their payment arrangements, understand their statements and shop around if appropriate.

If you process a lot of card payments, a relatively small reduction can add up.

On $3,000,000 of annual card transactions:

• 1.20% = $36,000
• 1.00% = $30,000

That is a $6,000 annual difference from a 0.2 percentage point movement.

It is worth making the phone call.

Once you know the actual cost and have checked whether you can reduce it, you can decide whether your pricing needs to change.

The ACCC has been quite clear on this.

Businesses can incorporate card acceptance costs into their overall prices.

What businesses cannot do is mislead customers about prices or the reason for an increase.

So if you previously sold something for $100 and charged a 1% card surcharge, you might decide the appropriate advertised price is now $101.

There is no separate card fee.

The customer knows the price before they pay.

That is very different from saying the business is no longer paying a merchant fee.

The cost has simply moved into the broader pricing decision.

The line that Australians will save $1.6 billion in surcharges makes for a good headline.

And technically, yes, those separate card surcharges are being removed.

But if businesses respond by incorporating some or all of the payment cost into their normal prices — which both the RBA and ACCC expressly say they can do — then part of that cost is still being paid by customers.

It just isn't appearing on the receipt as “Card surcharge: $1.00”.

The RBA itself says consumers at businesses that currently surcharge may pay similar amounts, just through the sticker price rather than a separate surcharge.

That is very different from saying $1.6 billion of economic cost has simply vanished.

The reforms may reduce some of the underlying merchant cost as well. Lower interchange caps and better fee transparency should help.

But the effect on an individual business depends on its provider, its pricing arrangement, its transaction mix and how much of the lower system cost is ultimately passed through.

That is why I would be careful with the headline numbers.

They describe the overall reform.

They don't tell you what happens to your business.

A merchant fee of 1% can sound immaterial.

It isn't always.

Imagine a business doing $5,000,000 in revenue and making $250,000 in net profit.

That is a 5% net margin.

If the change results in the business absorbing another $40,000 a year of merchant costs that it previously recovered separately, that represents 16% of its existing profit.

That is the number I care about.

Not whether the fee is “only 1%”.

A lot of business costs look small when expressed as a percentage of revenue.

What matters to the owner is what they do to profit. If you want to see where that shows up, start with how to read a profit and loss statement.

Hospitality is an obvious example because card payments are so common.

A café, restaurant or hotel still has to pay:

• wages
• rent
• food and beverage costs
• electricity
• insurance
• merchant fees

If one of those costs is no longer recovered separately, the business has to decide how it fits into its overall pricing.

That might mean changing prices.

It might mean negotiating a better merchant deal.

It might mean accepting some of the cost.

It might be a combination.

There is no reason every business needs to respond the same way.

But doing nothing is still a decision.

And if doing nothing costs the business $30,000 a year, I would want the owner to know that before making it.

The change can also matter for businesses accepting large card payments.

Professional firms, trades, accommodation providers and other service businesses can sometimes receive invoices worth thousands or tens of thousands of dollars by card.

A 1% payment-processing cost on a $20,000 invoice is $200.

At 1.5% it is $300.

If you process enough of those transactions, the annual number can become meaningful very quickly.

Businesses should know what payment methods they are offering and what those methods cost them.

The RBA says businesses can still encourage customers toward other payment methods by offering discounts.

That creates another option.

Instead of having a $100 price and a $1 card surcharge, a business might have a standard advertised price and decide to offer an appropriate discount for another payment method.

Any pricing needs to be structured properly and comply with consumer law.

I would not try to get clever by taking the old card surcharge and simply renaming it an “admin fee” or “technology fee” where it only applies because the customer paid by card.

The ACCC's guidance is clear that the new rules deal specifically with card payment surcharges. Genuine weekend surcharges, booking fees or service fees are a separate issue, but pricing must still be truthful and not misleading.

If your business previously charged card surcharges, I would work through this now rather than wait until year-end to see what happened to the margin.

Use the last 12 months of actual merchant fees.

How much of that cost were you recovering through surcharges?

That gives you the amount potentially moving back onto the business.

Ask what has changed to your pricing from 1 October.

Ask whether lower interchange costs are flowing through.

Compare the deal with alternatives.

If the business is now carrying a cost that customers previously paid directly, decide whether the selling price still makes sense.

Do not just increase prices because everyone else is doing it.

Run the numbers.

Check:

• EFTPOS terminals
• online checkouts
• invoices
• menus
• websites
• payment links
• customer communications

Make sure separate card surcharges have actually been removed where required.

This is one of those changes that can look small enough to ignore.

That is what I would avoid.

If merchant fees cost the business $5,000 a year, perhaps the answer is easy.

If they cost $50,000, $100,000 or more, it deserves a proper conversation. That is the kind of work we do in Business Advisory.

The government's message is that customers will no longer be hit with an extra card surcharge at the checkout.

Fair enough.

But for business owners, the job is not finished there.

You still need to know:

• What is accepting cards costing us?
• Has our provider reduced that cost?
• How much were we previously recovering?
• What does absorbing the difference do to our profit?
• Does our pricing still make sense?

That is the work I would be doing now.

Because the surcharge is gone.

The merchant fee isn't.