Wendy Armitage was expecting the “ouch factor” when she went to pay her bill at a car repair shop in Adelaide a fortnight ago.

As she was going to pay her $900 excess, the former accountant was shocked to see that she would have been hit with a substantial surcharge for the convenience of tapping her card.

“On their sign beside the point of sale, it was stated that there was a card surcharge of 16.5 per cent,” she told The Business.

“I was quite shocked, to be honest.”

Initially thinking the surcharge was a misplaced decimal, Ms Armitage queried it and was told she had read it correctly.

“So of my $900 excess bill, the card surcharge would have been $148.50,” she said.

The sign specified that all “tap” options would receive the 16.5 per cent surcharge, regardless if it was a debit or credit card, while a lower surcharge of just 30 cents would be applied if she inserted her card and entered her PIN.

In the end, Ms Armitage saved herself $148.20 simply by inserting her card and entering her PIN.

“I saved myself quite a lot of money to dine out on.”

Small businesses like Hamed Allahyari’s cafe in Melbourne’s west are also facing rising costs, on top of fees to process card payments.

While a proposal to ban surcharges might sound like welcome news for the Cafe Sunshine and Salamatea owner, he is worried it will be yet another cost to pass on to his customers by raising his prices.

“Unfortunately, we’d have to change the menu and change the prices … so that would be hard for customers to spend money,” he told The Business.

“The extra cost is going to be on us.”

‘A long, hard look’

On Tuesday, the federal government issued a stark warning to banks and payment providers by announcing it was considering banning debit card surcharges to prevent excessive fees.

The ban would take effect from January 2026, and would depend on a review of Australia’s retail payments system being undertaken by the Reserve Bank of Australia.

The central bank’s review will examine the costs merchants face when accepting payments via card, and the surcharging framework.

“In an environment of heightened concern around the cost of living, card payment costs and surcharging are attracting more attention from merchants and consumers,” the RBA said in a statement.

Analysis of RBA data has previously estimated that Australians are losing almost $1 billion each year because of card surcharges.

“Consumers are right. They don’t think it’s fair that they get slugged surcharges for accessing their own money, particularly when it’s becoming harder and harder and harder for them to access their cash through an ATM or a bank branch,” Assistant Treasurer Stephen Jones told The Business.

But Mr Jones stopped short of saying who should be responsible for bearing the cost.

“We don’t want the small businesses to be the meat in the sandwich here,” he said.

“We want consumers to get a benefit, we want small businesses to get a benefit, and we want banks and the system providers and the network providers to have a long, hard look at themselves about the charges that they’re passing onto small businesses and consumers.

‘Profit grab’ or the cost of doing business?

The head of the Australian Banking Association, Anna Bligh, said the charges are costs that businesses have to fork out for.

“There are many places in the world where surcharging is not permitted,” she said.

Currently, card transactions in Australia over the EFTPOS network cost businesses an average of 30 cents for a $100 purchase.

If that transaction goes through the Visa or Mastercard network instead, that costs an average of 50 cents — and it costs even more for businesses to process if purchases are made on a credit card.

Ms Bligh said she welcomed the RBA’s review into the country’s retail payments system, which would examine options to reduce transaction costs.

“There is a cost to running a fast, effective and safe payment system,” she said.

“We need to get an outcome that’s fair for consumers, one that’s fair for business and one that recognises you can’t have a safe, fast, effective payments system without a cost somewhere in all of that.

“This now is an opportunity to talk about and get a better answer on where those costs should be allocated.”

David Bassanese, Chief economist at Betashares, said the review by the RBA would also shed light on whether transaction costs aligned with the fees being charged.

“The question is, what are these fees covering?” he said.

“Are there underlying costs that these fees are covering, or is this really a bit of a profit grab by the companies exerting their market power in this area?

“The bottom line here is we need to make sure that the underlying fees are in keeping with the underlying costs that these companies are paying.”

The RBA’s review into retail payments regulation will be finalised next year.