Key Takeaways
- Card surcharges ended on 1 October 2026: Businesses can no longer add a separate surcharge to eligible Visa, Mastercard, American Express and eftpos payments.
- Some cafes have raised coffee prices: About 20% of surveyed cafes put prices up in October, and 50 cents were among the most common increases.
- The ban isn’t the only cause: Wages, rent, coffee beans, milk, utilities and supplier costs have all been climbing too.
- Most businesses haven’t changed prices: Separate transaction data suggests nearly nine in ten businesses hadn’t raised prices after the change.
- Merchant fees haven’t gone away: Businesses still pay to process card payments. They just can’t recover those costs through a separate surcharge.
- Protect your margins before changing prices: Look at your total operating costs, customer demand and profitability first.
- There are other options: Reviewing your payment provider, negotiating fees, and offering clearly disclosed discounts for other payment methods may all help.
- Keep an eye on cash flow: Tracking payment costs and operating expenses regularly makes it easier to absorb regulatory changes without financial strain.
Main Text Content
Australian Cafes Increase Coffee Prices Following the Card Surcharge Ban
Australian coffee drinkers are starting to notice the effects of the card surcharge changes. New data shows a number of cafes have raised their prices since October.
The new rules took effect on 1 October 2026 and stop businesses from adding separate surcharges to eligible card payments. Before that, some cafes and retailers added a small percentage when customers paid by credit or debit card, which helped cover the cost of accepting electronic payments.
With surcharges off the table under the new card network rules, businesses have to handle those costs another way.
According to news.com.au, data from the coffee price tracker SmallFlatWhite.com found that roughly 20% of surveyed cafes raised their coffee prices in October. The most common increase was around 50 cents.
The tracker looked at prices at 10,059 cafes across the country. A small flat white averaged $5.16 in October, up from $5.01 in April 2026, and a large flat white averaged $6.31.
So coffee is still getting more expensive, but the surcharge ban is only one of the things pushing prices up.
Cafes were already dealing with higher supplier prices, wages, and rent. Losing a separate payment fee may simply have given some owners another reason to look at their menus.
Plenty of businesses didn’t change anything, though. About 72% of surveyed cafes kept their prices the same in October, and around 9% recorded lower prices.
In other words, cafes are responding in different ways depending on their costs, their customers, and how healthy their finances are.
What Changed Under Australia’s Card Surcharge Ban?
The new rules came into effect on 1 October 2026 following changes to Australia’s retail payment arrangements.
Under the old system, businesses could charge a surcharge on certain card transactions to recover the cost of accepting them, within the applicable limits. Customers often saw an extra fee at the register when they paid by credit or with debit card.
Now, businesses can’t add separate surcharges to payments made with eligible Visa, Mastercard, American Express and eftpos cards.
The aim is price transparency. Customers should be able to see what something costs without working out a card fee at checkout.
That doesn’t make card payments free for businesses. Cafes, retailers and other merchants still pay merchant service fees, transaction charges and other costs charged by their payment providers.
The Reserve Bank of Australia has explained that businesses can reflect these costs in their overall pricing rather than charging them as a separate card surcharge.
For a cafe, that might mean looking again at the price of coffee, food, and other menu items. For a retailer, it could mean reassessing product prices or checking what their payment provider is charging.
The line to watch is this. Businesses can build payment processing costs into their general prices, but they can’t just rename a banned surcharge and keep charging it separately.
Why Are Cafes Increasing Their Coffee Prices?
The price data suggests the ban has nudged some cafes to adjust their prices. But it helps to look at the wider pressures on hospitality businesses.
Cafes have a lot of recurring costs, including coffee beans, milk, food, packaging, wages, rent, utilities, equipment maintenance and payment processing fees. Many of these have gone up in recent years, and plenty of cafes run on thin margins.
Coffee is also a tricky product to reprice. Customers usually have a firm idea of what a flat white should cost, so owners tend to be wary of putting prices up.
A cafe might absorb small cost increases for months rather than risk losing customers to the place down the road. Eventually, though, the combined weight of higher expenses makes the old prices hard to hold.
Losing the card surcharge could be what tips an owner over. Say a cafe used to charge a small surcharge and relied on it to help cover merchant fees. Now it has to choose between wearing the cost and building it into the prices every customer sees.
That doesn’t mean every price rise is down to the new rules. Some cafes were probably planning increases anyway because of wages, rent or ingredient costs.
What matters more for owners is knowing their total cost structure and making sure their prices are sustainable.
What Does the Data Say About Coffee Price Increases?
The latest findings give a mixed picture of how cafes are responding.
SmallFlatWhite.com’s October data found about 20% of surveyed cafes raised prices during the month. The most common increase was around 50 cents, and the average price of a small flat white reached $5.16.
The tracker also found that around 45% of cafes had increased prices at some point since April 2026.
Separate transaction data from payment provider Tyro adds a wider view. According to the news.com.au report, nearly nine in ten businesses hadn’t raised prices since the ban took effect. Among businesses that had previously charged card surcharges, 12.4% increased prices. Only 2.7% of businesses that had never charged surcharges did the same.
So the impact hasn’t been even. Some businesses have adjusted prices to recover processing costs, while others have absorbed the expense or found another way to manage it.
It’s also worth remembering that the two datasets measure different things. SmallFlatWhite.com tracks cafe menu prices, while Tyro’s figures relate to businesses using its payment services. You can’t treat them as interchangeable measures of the whole Australian business sector.
Still, both point to the same thing: a single price increase doesn’t tell you much about the broader effect of the surcharge changes.
Are Cafes Increasing Prices by More Than Their Previous Surcharges?
One concern is that some businesses have raised prices by more than the surcharge they used to charge.
A 50-cent rise on a $5 coffee is a 10% increase. The card surcharge many customers paid before was typically around 0.5% to 1.5%, so the gap is big.
That doesn’t automatically mean a cafe is using the ban as cover for a bigger increase. It may have held off adjusting prices for months while absorbing higher ingredient costs, wages and rent, and the surcharge change just prompted a review at the same time.
The Australian Competition and Consumer Commission (ACCC) has also reminded businesses that they must not mislead customers about prices or about the reasons for price increases.
Businesses can adjust their general prices to account for the cost of accepting cards. What they shouldn’t do is blame an increase entirely on the surcharge changes if other factors played a part.
For owners, that’s a good reason to base pricing decisions on real numbers. Adding an arbitrary amount to everything isn’t a strategy. It’s better to understand how total operating expenses have changed and work out what increase is commercially reasonable.
How the Card Surcharge Ban Affects Small Business Profit Margins
Losing a card surcharge might look minor, especially if a business only charges a small fee. But small costs add up across thousands of customer payments.
Take a cafe that processes $40,000 in card payments a month. If its average processing cost is 1%, that’s about $400 a month in fees, or $4,800 a year.
Previously, the cafe may have recovered some or all of that through surcharges. Now it has to cover the cost through its general prices or absorb it from its margin.
If it does neither, nor doesn’t cut costs elsewhere, profit will drop. For a business already stretched by wages, rent and supplier bills, an extra $400 a month can make a real difference to what’s left for everything else.
It gets harder when payment costs sit alongside other rising expenses.
That’s why merchant fees shouldn’t be brushed off as an admin detail. They’re a genuine cost of running the business and belong in your financial reporting and pricing decisions.
How Cafes Can Review Their Pricing Strategy
The surcharge changes are a good prompt for cafe owners to check whether their menu prices actually cover the cost of running the business.
A good place to start is working out what it costs to make and sell each of your main products. For coffee, that means beans, milk, cups, lids, packaging, labour and a fair share of overheads. Payment processing costs should be part of the picture too.
Once you know those numbers, you can see whether your current prices leave enough margin to cover expenses and still make a profit.
Review product-level profitability. Not every item on the menu earns the same. Some have higher ingredient costs or take longer to prepare, and looking at profit by product shows you which ones need attention.
Understand customer demand. A price rise improves the margin on each sale, but it might also mean fewer sales. Think about how your customers behave, what competitors charge, and what value you offer.
Avoid arbitrary price increases. Adding the same amount to every item usually isn’t the smartest move. Some products already have healthy margins, while others may be underpriced for what they cost to make.
Monitor changes regularly. Ingredient prices, wages and merchant fees all shift over time. Checking your pricing and profitability regularly lets you respond before rising costs eat into your margins.
Good pricing should be fair to customers and sustainable for the business.
Should Small Businesses Absorb Merchant Fees or Increase Prices?
There’s no single right answer. It depends on your finances, your customers, and your local competition.
Absorbing merchant fees can make sense if you have strong margins and healthy cash flow. It can also keep you competitive and avoid putting off price-sensitive customers.
But absorbing every extra cost slowly chips away at profit. If your margins are already tight, you may not be able to keep doing it.
Raising general prices can help reduce some of the cost, though you need to think about how customers will react. A cafe that pushes coffee prices up too hard may lose people to nearby competitors, and a retailer that changes prices without checking the market could see sales fall.
Many businesses end up with a mix. They absorb part of the payment cost, renegotiate with suppliers, tighten up how they operate, and make a few selective price changes.
Whatever you choose, base it on your own numbers rather than guesses about what competitors are doing. It’s also worth asking whether you can bring the cost down by negotiating with your provider or switching to a better-suited payment arrangement.
Reviewing Merchant Fees and Payment Providers
One practical response to the surcharge changes is to take a hard look at how you process payments.
Providers don’t charge the same. Costs vary with transaction volume, average sale value, card types, payment methods, and the agreement you’ve struck with the provider. If you’ve been with the same provider for years, there’s no guarantee you’re still getting a competitive deal.
Start by going through your merchant statements to find out what accepting payments really costs you. Look for:
- Merchant service fees.
- Per-transaction charges.
- Terminal rental or equipment costs.
- Monthly account or service fees.
- Payment gateway charges.
- Fees for certain card types or international transactions.
With the full picture, you can compare providers and ask whether a different pricing structure would suit you better.
Price isn’t everything. Think about service quality, settlement times, reliability, reporting and how well the provider works with your accounting or point-of-sale systems. The cheapest option isn’t much used if it’s unreliable or creates extra admin.
The Reserve Bank of Australia has also outlined further payment system reforms aimed at improving transparency and reducing some card payment costs over time. Keep an eye on those developments and check whether any savings are showing up in your own merchant fees.
Can Businesses Offer Discounts for Cash or Other Payment Methods?
Businesses can’t add separate card surcharges anymore, but they can still offer discounts for particular payment methods, as long as they meet the applicable requirements. A cafe might, for example, give a discount to customers who pay with cash or PayID.
The key is to make sure the discount is clearly disclosed before customers decide to order, book, or pay. The ACCC has issued guidance on how payment method discounts should be displayed. Businesses shouldn’t advertise only the discounted price or make it more prominent than the full price in a way that misleads customers.
There are practical things to weigh up as well. Taking cash means extra work: handling, storage, reconciliation, and bank deposits. You’ll want to check that the savings on card fees outweigh those costs. Other payment methods can have their own fees and admin too.
Before changing how you take payments, look at the total financial impact and think about what it does for the customer’s experience.
What Small Businesses Should Do to Protect Cash Flow
The surcharge changes are a reminder to keep a close eye on cash flow and operating costs.
A business can bring in plenty of revenue and still come under pressure if expenses grow faster than payments arrive, or if margins get too thin. Cafe owners and other small business operators can take a few steps.
Review monthly payment processing expenses. Work out how much you spend on merchant fees and compare it with earlier periods. It’ll show you whether payment costs are becoming a problem.
Update cash flow forecasts. Include merchant fees, wages, supplier payments, rent, utilities, and other regular expenses. A good forecast shows how changes in pricing and costs affect the cash you have available.
Review profit margins. Look past total revenue and see how much each product or service actually contributes to operating profit. That tells you whether your current prices are going up.
Monitor supplier costs. Negotiate where you can review your purchasing arrangements. Better terms may help offset some of the extra payment costs.
Build a cash reserve where possible. Having money set aside for surprises makes quiet periods and cost spikes easier to get through.
Review financial performance regularly. Monthly reporting helps you spot shrinking margins, rising costs, and cash flow problems before they get serious.
Together, these habits help you respond to regulatory change while keeping a firm grip on your finances.
The Importance of Understanding Your True Cost of Doing Business
The end of card surcharges is a reminder that owners need to know what it really costs to deliver their products and services.
For a cafe, the cost of a cup of coffee goes well beyond beans and milk. It includes staff time, rent, utilities, equipment, cleaning, insurance, packaging, payment processing, and other overheads.
If you don’t count all of that, you can end up with prices that look competitive but don’t leave enough profit.
The same goes for other industries. Retailers have inventory, freight, storage, and payment costs to think about. Service businesses carry labour, software subscriptions, insurance and admin. Trades businesses have vehicles, fuel, equipment and payment arrangements to cover.
When you know your true costs, you can make better pricing decisions. You can also spot where costs might come down without hurting service or customer experience.
Instead of reacting to each cost to increase as it lands, step back regularly and look at the overall financial picture. Then make sure your prices cover what it takes to keep the business running.
How Sunnyside Financial Group Can Help
Changing payment rules, rising operating expenses and higher supplier costs make it harder for Australian businesses to keep their margins healthy.
Looking at sales figures alone won’t show you the impact. You need to know how your expenses are changing, whether your current pricing still works, and how much cash you have to keep things running day to day.
Sunnyside Financial Group helps Australian businesses make tax, cash flow and profitability simpler through accounting, tax planning, financial reporting and broader business advisory support.
A review of your business’s financial performance can show where expenses are rising, how profitable you really are and whether it’s time to adjust your prices.
Cash flow forecasting can also show how merchant fees, supplier costs, and other expenses affect your ability to meet your commitments.
For cafes and other small businesses, regular financial reviews give a clearer view of where the money is going and where you might be able to work more efficiently. With reliable numbers in hand, it’s much easier to make decisions about pricing, payment arrangements, and growth.
Learn more at Sunnyside Financial Group.
Final Thoughts
The card surcharge ban has changed how Australian businesses account for the cost of accepting electronic payments.
It was meant to make prices clearer for consumers. For cafes and other businesses that relied on surcharges to recover merchant costs, though, it’s added a new pricing decision.
Some cafes have raised coffee prices, while many others have held steady. That reflects the different pressures and choices facing each business.
The main lesson for owners is to understand what it really costs to operate and make sure pricing decisions are backed by accurate financial information.
Reviewing merchant fees, watching your margins, comparing payment providers, and keeping a realistic cash flow forecast can help you adapt without giving up profit you don’t need to.
Sustainable pricing isn’t just about passing costs on to customers. It’s about knowing the value your business provides, managing expenses sensibly, and making sure revenue is enough to keep the business going for the long term.
Disclaimer: This article is general information only and isn’t financial, tax, accounting or legal advice. Card payment rules and business obligations may change. Check current guidance from the Reserve Bank of Australia, the Australian Competition and Consumer Commission and your payment service provider, and get professional advice where needed.
