Cafes Brace for Price Hikes Following Credit Card Surcharge Ban

A proposed ban on credit card surcharges for in-person payments may lead to higher prices at cafes and restaurants, according to industry leaders. The New Zealand government plans to introduce legislation to Parliament by the end of the year, aiming to eliminate these surcharges entirely by May 2026.

Richard Corney, the founder of Flight Coffee and The Hangar cafe, expressed concerns about the financial implications of this policy. He stated that his cafe incurred approximately $17,000 in merchant fees in 2023, an expense he feels obligated to pass on to customers. “Yes, it speeds up service and there’s value in using it, but banning vendors from charging this expense is not the solution,” Corney said. He further suggested that if the government is considering restrictions on banks, it should instead focus on eliminating fees that burden small businesses.

Corney highlighted that many cafes operate with profit margins of less than five percent, making it challenging to absorb additional costs. He stressed that banks, as essential institutions, do not face the same financial pressures as small businesses. “That $17,000 is a significant portion of our after-tax profit. I absolutely have to on-charge any associated expenses,” he added.

The hospitality sector is increasingly vocal about the challenges posed by rising costs. Marisa Bidois, chief executive of the Restaurant Association, echoed Corney’s concerns. She noted that removing surcharges would necessitate that businesses absorb these fees, further straining already narrow profit margins. “These surcharges are genuine costs that businesses must pay,” Bidois explained.

The announcement of the ban took many in the industry by surprise. Bidois mentioned that the restaurant sector had actively engaged with the government to discuss the financial pressures stemming from bank-imposed fees. “While we welcome consumer-focused changes, we are concerned about the lack of consultation on this particular announcement,” she said.

Bidois anticipates that restaurants and cafes will likely need to adjust their pricing strategies to accommodate the absence of surcharges. “Removing the ability to surcharge could mean businesses factoring these costs into their overall pricing, potentially leading to increased costs for diners,” she noted.

The implications of this policy shift could reshape the landscape of the hospitality industry. As businesses navigate these changes, customers may soon find themselves facing higher prices, a reflection of the financial challenges that cafes and restaurants are grappling with in the current economic climate. The government’s decision, while aimed at benefiting consumers, may inadvertently place additional burdens on small enterprises struggling to maintain profitability.