If your business currently passes credit or debit card processing fees on to customers, an important change is coming.

From 1^st October 2026, businesses will no longer be able to surcharge customers paying by eftpos, Visa, Mastercard or American Express (AMEX). Other major payment networks are also removing surcharging, including UnionPay and PayPal.

For businesses using Xero Online Payments, Xero has advised that it will automatically remove its card surcharge functionality from 1^st October.

While that makes the Xero side relatively straightforward, there is still an important question for business owners:

What are you going to do with the processing fee you can no longer pass on to your customer?

For businesses processing a significant amount by card, simply absorbing these fees could have a noticeable impact on profit over the course of a year.

Why are card surcharges being removed?

The change follows the Reserve Bank of Australia’s review of merchant card payment costs and surcharging.

The RBA concluded that surcharging was no longer achieving its original purpose of encouraging customers to choose lower-cost payment methods. It also found that the system had become increasingly complex and that surcharges were not always clearly disclosed.

As part of a broader package of payment reforms, the RBA has changed its standards to allow card networks to impose ‘no-surcharge’ rules. Eftpos, Mastercard and Visa have confirmed they will do so from 1^st October 2026.

At the same time, the RBA is reducing interchange fee caps and introducing greater transparency around the fees charged to businesses. These measures are intended to place downward pressure on the cost of accepting card payments, particularly for small businesses.

What payments are affected?

From 1^st October, businesses generally won’t be able to add a card surcharge when a customer pays using:

• eftpos debit or prepaid cards
• Visa debit, credit or prepaid cards
• Mastercard debit, credit or prepaid cards
• American Express cards.

UnionPay is also removing surcharging from 1st October, with PayPal following from 5^th October.

Importantly, the change isn’t limited to retail transactions. The RBA has confirmed that business-to-business card payments are not automatically exempt, so businesses invoicing other businesses also need to review their payment arrangements.

The changes relate specifically to card payment surcharges. They don’t automatically prohibit unrelated charges such as genuine booking fees or weekend and public holiday surcharges.

What happens if you use Xero?

For businesses using Xero Online Payments, Xero is handling much of the technical change automatically.

Xero has advised that from 1^st October 2026:

• card surcharging will be switched off across Xero
• the option to pass card processing fees on to customers will disappear from Online Payments settings
• customers will still be able to pay invoices by card as usual, but the processing fee will no longer be added to their payment
• unpaid invoices that currently have a surcharge applied will also be affected – if the customer pays on or after 1 October, they will pay the invoice amount without the card surcharge.

So there is no need to manually switch Xero’s surcharge functionality off on 1^st October.

But Xero switching off the surcharge doesn’t make the processing cost disappear.

The business will still need to consider how that cost fits into its pricing and payment strategy.

What could this mean for your bottom line?

This is where we encourage business owners to do the maths rather than simply absorb the change without thinking about it.

For example, if your business receives $30,000 per month in card payments and your average processing cost is around 1.5%, that’s approximately $450 per month, or $5,400 per year.

At $50,000 per month through card payments, the same 1.5% would represent approximately $9,000 per year.

The appropriate response will depend on your margins, average transaction size, customer base and the proportion of customers who actually pay by card.

For some businesses, absorbing the cost may be perfectly reasonable. For others, several thousand dollars of additional annual merchant fees warrants a review of pricing.

What are your options?

1. Build the cost into your pricing

Rather than adding a separate fee when the customer pays, you may decide that merchant costs should simply form part of your overall pricing – just like bank fees, software, insurance and other costs of running the business.

That doesn’t necessarily mean increasing every price by your current card surcharge percentage. Ideally, you should look at your total annual card processing costs across your total sales and determine the actual impact on your margins.

A relatively small adjustment across your overall pricing may be enough to recover the cost.

2. Absorb the processing fees

You may decide the simplest option is to absorb the cost.

There can be a genuine commercial benefit to making payment easy. If accepting card payments means customers pay more quickly and your team spends less time chasing outstanding invoices, the processing cost may be worthwhile.

The important thing is to make that decision knowingly rather than discovering several months later that merchant fees have quietly eaten into your margin.

3. Encourage lower-cost payment methods

This is also a good opportunity to review how your customers pay you.

Depending on your payment provider, alternatives such as direct debit, bank transfer or PayTo may be less expensive than card transactions.

The goal doesn’t necessarily have to be eliminating card payments. Offering convenient payment choices while encouraging regular customers toward lower-cost options can reduce your overall cost of getting paid.

4. Review your payment provider

Another part of the RBA reforms is aimed at making merchant fees more transparent.

From late October 2026, large payment providers will be required to publish specified information about their card payment fees, with further merchant fee transparency measures commencing in 2027. This should make it easier for businesses to understand and compare payment costs.

If you haven’t reviewed your merchant fees for some time, this may be a good opportunity to do so.

Can I just call it something else?

Be careful here.

Changing the description from ‘card surcharge’ to something like a ‘card processing fee’ doesn’t necessarily change what the fee actually is.

The new rules concern an additional charge imposed because the customer has chosen to pay by card. Businesses should therefore avoid simply recreating the existing surcharge under another name.

Genuine fees that are unrelated to the customer’s use of a card are different, but your pricing still needs to comply with Australian Consumer Law and applicable card-network rules. The ACCC recommends businesses review their pricing and customer-facing information ahead of the change.

What about offering a discount for bank transfer or another payment method?

This is an area where the detail matters.

The RBA specifically notes that businesses may consider using discounts to influence customers toward particular payment methods, rather than card surcharges. However, businesses also need to comply with Australian Consumer Law requirements around displaying prices and should check the arrangements with their payment provider.

If you’re considering restructuring your prices or introducing payment-method discounts, it’s worth reviewing the arrangement properly rather than simply reversing your existing surcharge.

What should you do before 1^st October?

If your business currently accepts card payments, now is a good time to:

1. Check how much you actually paid in merchant and processing fees over the last 12 months.
2. Work out what percentage of your sales are currently paid by card.
3. Calculate what absorbing those fees would cost you annually.
4. Review your pricing and margins to determine whether an adjustment is needed.
5. Review alternative payment methods, particularly for recurring customers.
6. Check your website, quotes, invoices, terms and other customer communications for references to card surcharges.
7. Speak with your payment provider if you use a system other than Xero to confirm how they will implement the change.

The ACCC is similarly encouraging businesses to prepare now by reviewing pricing, updating customer-facing materials and speaking with payment providers before the new rules commence.

The important part: don’t automatically absorb the cost without checking your numbers

For a business with only occasional card transactions, this change may have very little impact.

For another business processing hundreds of thousands of dollars through cards each year, it could represent thousands of dollars of additional annual costs.

That’s why our recommendation isn’t simply ‘increase your prices’ or ‘absorb the fee’.

Work out what the change actually costs your business first.

At Intrinsic Accounting, we can help you review your merchant fees, margins and pricing to understand the real impact of the surcharge changes and determine what makes sense for your business before 1^st October.

If you’re unsure what the surcharge ban will mean for your business, get in touch and we can help you work through the numbers.

 https://intrinsicaccounting.com.au/ 

This article provides general information only and does not constitute financial, taxation or legal advice. Payment arrangements and pricing decisions should be considered having regard to your individual business circumstances.

Sources: Reserve Bank of Australia – Review of Merchant Card Payment Costs and Surcharging and FAQs; Australian Competition and Consumer Commission – Card Surcharges; Xero – The ability to surcharge is going: Here’s what it could mean for your bottom line, and how Xero is helping.