Adam Houlahan Questions Consumer Win as Payment Surcharges Disappear, Prices Rise

In a recent LinkedIn post, Adam Houlahan scrutinizes the implications of Australia’s new ban on credit card surcharges, questioning whether the change truly benefits consumers.

Effective from today, Australians will no longer see separate surcharges for payments made via Visa, Mastercard, eftpos, or American Express. While this may appear to be a consumer win on the surface, Houlahan argues that the underlying costs have not vanished but have instead been absorbed into base prices, potentially leading to higher overall expenses for all shoppers.

“On the surface, that sounds like good news. But the cost of accepting card payments hasn’t disappeared. Businesses are still paying merchant and processing fees; they just can’t add them separately anymore. So where does that cost go? Into the price.”

The Hidden Cost of “Free” Payments

Houlahan highlights that businesses are still incurring merchant and processing fees. Instead of passing these on as a visible surcharge, which typically ranged from 1-2%, many are now increasing their standard prices by a more significant margin, around 5%.

As Adam Houlahan points out, this shift means that a $100 purchase that might have cost $101.50 with a surcharge could now simply be priced at $105. This increase, Houlahan notes, affects all customers, including those who pay with cash and would not have incurred a surcharge previously.

“A typical card surcharge used to be around 1–2%. Yet I’m seeing businesses increase their standard pricing by around 5%. Take a $100 purchase. With a 1.5% card surcharge, the total used to be $101.50. Now that same purchase could simply become $105. And unlike the old surcharge, everyone pays it. Cash customers included.”

Reduced Payment Options and Flexibility

Beyond increased prices, Houlahan raises concerns about the potential reduction in payment options. He shares an anecdote where a property management agency, unable to pass on processing fees, has stopped accepting rent payments by credit card.

This decision, Houlahan explains, removes a valuable flexibility option for tenants who might rely on credit cards for short-term cash flow management. He also points to the Australian Taxation Office’s (ATO) decision to stop accepting credit card payments altogether from November 2026, citing the inability to pass on merchant fees.

“The ATO has now announced that it will stop accepting credit card payments altogether after 30 November 2026. Its reasoning is straightforward: if it can no longer pass the merchant fee on, it doesn’t believe the broader community should absorb that cost.”

According to Adam Houlahan, the ATO acknowledges that some taxpayers utilize credit cards for managing tax payments and will need to find alternative methods, indicating a broader trend of reduced payment flexibility.

Transparency vs. True Consumer Benefit

Houlahan concludes by questioning the net benefit for consumers. While the intention behind the change was to create cleaner, more transparent pricing by removing the visible surcharge at checkout, the reality may be higher base prices and fewer payment choices.

Adam Houlahan poses a critical question: if a visible 1-2% surcharge is replaced by a permanent 5% price increase and a reduction in payment options, have consumers truly gained anything? In his view, the trade-off might be a less transparent system with less flexibility, rather than a genuine win.