Businesses will be banned from charging customers a separate fee for card payments under reforms promoted as a measure to relieve cost-of-living pressure.
However, the policy has drawn sharp criticism from small businesses, which say absorbing the cost will put further strain on already shrinking profit margins.
The Reserve Bank of Australia reforms take effect on Thursday. Retailers will no longer be permitted to add a card surcharge, leaving them to absorb the expense or incorporate it into the prices of their goods and services.
For Monarch Cakes, a 92-year-old institution on Melbourne’s Acland Street in St Kilda, the change is likely to mean higher prices for the first time in several years.
Bakery manager Nikki Laski described the surcharge ban as the final blow in the business’s efforts to keep prices steady for its loyal customers.
‘We’re going to have to raise the prices,’ she told AAP.
‘We were due to anyway because everything else has gone up.
‘But this is going to be the straw that broke the camel’s back.’
Bakery manager Nikki Laski says the added pressure on small businesses could force some to shut their doors
Most experts agree removing card surcharges will ultimately benefit consumers
Large retailers such as Coles and Woolworths were already absorbing card payment costs because they had the financial capacity to do so, Ms Laski said.
‘It’s the small businesses that do that because they have to in order to survive,’ she said.
The RBA is also seeking to reduce the pressure on businesses by lowering interchange fees. These charges are paid by a merchant’s bank to a customer’s bank whenever a card transaction is processed.
The central bank expects the new cap of 0.30 per cent, down from 0.80 per cent, to cut business payment costs by about $660 million a year.
Financial comparison website Finder said experts were divided over how the changes would affect prices at the checkout. Even so, most agreed consumers would be better off overall.
Prime Minister Anthony Albanese endorsed the surcharge ban on Wednesday, describing it as another cost-of-living measure introduced by his government.
‘I think when people turn up and tap, be it at a coffee shop or a pub or buying a sandwich for lunch, they expect the price that they see to be the price that they pay,’ he said.
Treasurer Jim Chalmers said the reforms would save consumers $1.6 billion in card surcharges and deliver annual savings of $910 million for businesses.
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Restaurant owner John Iodice says he does not plan to pass the surcharge cost on to customers
Ms Laski said the reforms might appear to be a win for shoppers, but warned that everyone would suffer if the small businesses providing those services could not afford to stay open.
‘That whole seven cents off your coffee might mean that your favourite coffee shop closes,’ she said.
John Iodice, who runs the nearby St Kilda bar and eatery The Vineyard, told AAP he couldn’t realistically pass the surcharge on to customers even if he wanted to.
‘Imagine it – we’ve got a happy hour, $10 for a pint, but now we’re going to have $10 and 15 cents?’ he said.
‘I’m going to put, ‘Monday night steak special, $20 and 20 cents’?
‘Obviously, we’re going to just cop it.’
Across the road at St Kilda’s Wedge Cafe, owner Rami Omran had already raised the price of his coffees at the start of September, in part due to the impending changes.
The decision wasn’t just based on the surcharge ban, but also on increases in other fees and compliance costs, he told AAP.
Cafe owner Rami Omran says the credit card surcharge will now come out of his pocket
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He called an outright ban on card surcharges ‘silly’.
‘People can pass on all these other charges, but not that for some reason,’ he said.
‘People can run the biggest scam of all time, which is the weekend and public holiday surcharges.’
To Mr Omran, customers didn’t care in the first place about paying the surcharge, which will now come out of his pocket.
‘Everyone just tapped.’