What a small business really pays to accept card payments

By Jonas Valenti · 2026-08-04

Three costs inside every card tap

Strip back any card transaction and you find three distinct charges stacked inside what the acquirer bills as a single merchant fee. A merchant's cost of acceptance is made up of interchange fees paid to the card issuer, scheme fees charged by the card network, and an acquirer margin levied by the payment service provider.^[1] Each layer has different drivers, different regulators and different leverage points for a merchant trying to cut their bill.

Interchange is the biggest single component for most merchants and the piece regulators have historically controlled most directly. It flows from the merchant's bank to the cardholder's bank on every transaction, and its rate varies by card type, network, and whether the sale happens in-store or online. Scheme fees, paid to Visa, Mastercard or eftpos, sit on top and have attracted less regulatory scrutiny until recently.

Understanding the split matters because flat-rate pricing, the dominant model for small merchants in Australia, bundles all three together. When a provider quotes 1.4% per transaction, there is no visibility into how much is interchange mandated by the networks, how much is scheme fees, and how much is the acquirer's commercial margin. The RBA's own data makes that opacity costly.

The numbers and the gap they reveal

As of 2022, the average merchant fee for eftpos transactions was 0.3% of transaction value, Mastercard and Visa debit 0.5%, and Mastercard and Visa credit 0.9%.^[1] Those averages flatten a distribution that is far more punishing at the small end. Troy Gill, Senior Manager in the RBA's Payments Policy Department, said the average cost for a merchant to accept a card payment has declined over recent years.^[1]

The merchant-level data is stark. In 2020-21, merchants in the first decile, those with turnover around A$100,000, faced an average cost of acceptance of 1.15% of transaction value. Merchants in the tenth decile, turning over around A$1.5 billion, paid just 0.47%.^[1] On A$100,000 of card turnover, the difference between 1.15% and 0.47% is A$680 a year in extra fees paid by the merchant who can least afford it.

Large retailers negotiate interchange directly with card networks, access interchange-plus pricing where each component is billed separately, and have the volume to push back on acquirer margins. A café on a flat-rate plan has none of those levers. The acquirer sets a rate that covers the highest-cost card types the merchant might accept, with premium rewards credit cards carrying interchange near or above 1%, and blends everything into one number the merchant cannot interrogate.

Why the surcharge regime failed its own logic

The RBA introduced merchant surcharging rights more than two decades ago to steer consumers toward lower-cost payment methods. The theory was coherent: if consumers paid the real cost at the point of sale, they would reach for cheaper cards. In practice, the regime drifted badly. Single-rate merchant plans gave businesses no accurate cost signal to pass through, enforcement of the no-excessive-surcharging rule was uneven, and the decline of cash removed the alternative that originally anchored the steering effect.

Consumers were estimated to be paying A$1.6 billion of the A$1.8 billion in annual card surcharges charged on designated networks, meaning the overwhelming majority of the surcharge burden had shifted to cardholders rather than functioning as a competitive signal.^[3] That figure sat at the centre of the Payments System Board's case for abolition.

The surcharge ban does not arrive in isolation. It is the headline item in a package that also restructures the interchange caps setting the floor beneath merchant costs. Removing surcharges while also reducing the underlying cost means merchants are not simply told to absorb fees that remain unchanged.

What changes from 1 October 2026

The Payments System Board confirmed three interconnected decisions on 31 March 2026. Surcharging on debit, prepaid and credit cards on the designated eftpos, Mastercard and Visa networks will be prohibited from 1 October 2026.^[2] The cap on domestic debit interchange drops from 10 cents to 8 cents per transaction on the same date, and a 0.3% cap on consumer credit interchange also takes effect then.^[2]

RBA Governor Michele Bullock set out the rationale directly. "Following our review of card payments, we announced three key changes. Surcharging on debit and credit cards should end from 1 October, we are lowering interchange fee caps on debit and consumer credit cards, and improving transparency around payment costs," she said.^[4] The transparency element, requiring acquirers to break out fee components on merchant statements, is less visible than the ban but creates the conditions for merchants to negotiate on each component rather than accepting an opaque bundle.

The debit interchange cut matters most to high-volume, low-value merchants. A hospitality business processing hundreds of small contactless eftpos and debit transactions daily accumulates interchange in per-transaction cents, not percentages. Moving from 10 cents to 8 cents per transaction reduces that running cost by 20% at the interchange layer, before acquirer margins are considered.

Reading your merchant statement: a practical checklist

Most small-business owners receive a single monthly statement from their acquirer showing total fees deducted and total card turnover. The first step is requesting an interchange-plus or cost-plus statement if you are not already on one. This separates the three cost components instead of blending them, and if your provider cannot or will not supply an itemised breakdown, that is itself a signal about your pricing structure.

Once you have an itemised statement, look at the card-type mix first. If a significant share of your transactions come from Visa Infinite or Mastercard World Elite credit cards, common among business travellers and high-spend consumers, you are absorbing premium interchange rates regardless of your headline plan rate. Some acquirers allow merchants to route transactions to the cheaper available network when both are available on a dual-network debit card; this is called least-cost routing and it is already available from several Australian acquirers.

From October 2026, the structure of your statement will change regardless. Surcharges disappear as a recoverable line item, so if you are currently surcharging to offset your cost of acceptance, base prices need reviewing before the October deadline. For a café with A$500,000 in annual card turnover paying the small-merchant average of 1.15%, annual acceptance costs run to A$5,750; at the large-merchant average of 0.47%, the same turnover costs A$2,350. The reforms narrow that gap at the interchange layer, but the acquirer margin will determine how much of the saving flows through to smaller operators in practice, and watching your itemised statement after October will show whether your acquirer passed the saving on.

Jonas Valenti

Jonas Valenti writes about search and how businesses get discovered. He has spent years watching what makes a company visible online, and is unsentimental about tactics that no longer work.