Card surcharge ban triggers early price hikes at Qld cafes

A federal ban on card surcharges due to start October 1 is already reshaping price boards at cafes across Queensland, months before the change delivers any of its promised savings to customers.

The Reserve Bank says scrapping surcharges will save Australian consumers about $1.6 billion a year nationally. But hospitality operators argue the change merely moves the cost of card processing off the till and into everyday prices, since banks continue charging merchants directly for every transaction.

Phil Della, owner of Debella Coffee and founder of industry network The Coffee Commune, said more than half of the group's 1,300 Queensland cafe members had already lifted prices by 5 to 10 per cent in the six weeks leading up to the ban.

The Coffee Commune, which counts more than 1,850 hospitality businesses among its members nationally, had joined the Australian Retailers Association last year in lobbying to delay the surcharge ban, buying operators extra time before the change took effect.

Surcharging on card payments was originally allowed so businesses could recover the cost of accepting cards rather than absorbing it themselves, a practice regulators have increasingly viewed as an unwelcome hidden cost for shoppers. The RBA's move to ban it follows years of consultation, but critics such as Della argue it removes one visible charge while leaving the underlying merchant fee structure untouched.

Della said the core issue was that while cafes can no longer pass the surcharge directly to customers, banks still bill merchants processing fees of between 0.7 and 1.7 per cent per transaction, depending on how much bargaining power a business has with its provider. For an industry Della says runs on an average profit margin of around 3 per cent, even the lower end of that range represents a significant hit to the bottom line.

"What starts as good intentions ends up badly executed," Della said, arguing the policy shields consumers from a visible line-item surcharge while leaving them exposed to the same cost through higher menu prices, on top of GST.

He said cafes and other small hospitality businesses were already contending with rising wages, rent and utility costs, and that operators buying dozens of ingredients faced compounding price pressure that simpler service businesses did not.

Della pointed to shrinking household disposable income as the clearest sign of financial strain, saying Australia now ranks poorly among developed economies on that measure even as headline wages climb.

For now, he said, customers should expect the price increases many cafes have already introduced in recent weeks to remain in place well beyond October 1, regardless of what ultimately happens to the surcharge itself.