Businesses can no longer charge customers a direct fee for paying by card as of Thursday – but the move isn’t without its critics.

Spruiked as helping to ease cost-of-living pressures, it has instead copped criticism from small businesses as yet another hit to their dwindling profit margins.

From October 1, Reserve Bank of Australia reforms mean retailers are banned from charging customers an additional fee for paying by card. They  must either absorb the cost themselves or build it into their prices.

Monarch Cakes, one of the stalwart businesses of St Kilda’s Acland Street in Melbourne, is likely to raise prices for the first time in years as a result.

Nikki Laski, who manages the 92-year-old bakery, called the ban the final straw in terms of keeping prices stable for their many regular customers.

“We’re going to have to raise the prices,” she said.

“We were due to anyway because everything else has gone up. But this is going to be the straw that broke the camel’s back.”

Laski said big businesses, including Coles and Woolworths were already absorbing the cost of card fees because they could afford to.

“It’s the small businesses that do that because they have to in order to survive,” she said.

To help ease the overall pressure, the RBA has also capped interchange fees, which are paid by the merchant’s bank to the customer’s bank each time a payment is processed.

The central bank expects the new maximum rate of 0.30 per cent – down from 0.80 per cent – will deliver around $660 million a year in lower payment costs for businesses.

Experts are split on the actual effects of the changes at the till, according to financial comparison site Finder. However, most agreed it would be a net positive for consumers.

On Wednesday, Prime Minister Anthony Albanese backed the surcharge ban, calling it another example of cost-of-living relief from his government.

“I think when people turn up and tap, be it at a coffee shop or a pub or buying a sandwich for lunch, they expect the price that they see to be the price that they pay,” he said.

Treasurer Jim Chalmers said the ban would save consumers $1.6 billion in card surcharges and save businesses $910 million each year.

But Laski said while the changes might seem like a win for customers, everybody lost if the small businesses that provided those services were no longer around.

“That whole seven cents off your coffee might mean that your favourite coffee shop closes,” she said.

John Iodice, who runs nearby St Kilda bar and eatery The Vineyard, said he couldn’t realistically pass on the surcharge to customers even if he wanted to.

“Imagine it – we’ve got a happy hour, $10 for a pint, but now we’re going to have $10 and 15 cents?” he said.

“I’m going to put, ‘Monday night steak special, $20 and 20 cents’?
“Obviously, we’re going to just cop it.”

Across the road at Wedge cafe, owner Rami Omran already raised coffee prices a month ago, in part due to the impending charges. The decision was based on the surcharge ban and rises in other fees and compliance costs, he said.

Omran said an outright ban on card surcharges was “silly”.

“People can pass on all these other charges, but not that for some reason,” he said.

“People can run the biggest scam of all time, which is the weekend and public holiday surcharges.”

To Omran, customers didn’t care about paying a surcharge – the amount of which will now come out of his pocket.

“Everyone just tapped.”

-AAP