The cost of using your credit card is expected to increase as more businesses apply a surcharge to purchases made with the plastic, a report suggests.

The increase has its origins in a 2003 decision by the Reserve Bank to allow businesses to charge customers a fee for using a credit card to make purchases. The impost could be either a percentage of the total purchase price or a fixed dollar amount.

The initial take-up was modest, with most merchants willing to absorb the cost of accepting credit card payments as part of the "sticker" price.

But businesses have gradually started to add to the surcharge, particularly large corporations such as Qantas and Telstra, two of the fee's earliest adopters.

The practice is now beginning to filter through to smaller businesses, such as local chemists and takeaway restaurants, says the latest Merchant Acquiring and Card Markets report from banking research firm East and Partners.

The report, released this week, found 11 per cent of the companies surveyed with an annual turnover of between $1 million and $5 million applied the surcharge - more than double the proportion a year ago.

However, the top end of town still leads the way with the surcharge, with 26 per cent of merchants adding the fee to their bill and a further 38.7 per cent saying they planned to do so in coming months.

East and Partners financial markets analyst Zoran Knezevic said smaller businesses had always been reluctant to apply the surcharge, fearing customers would shop elsewhere.

But as merchant fees - charges that a business has to pay for being able to accept credit card payments - have increased, many firms have decided to recover those costs.

"Over time, as surcharges became more common, the critical mass has been building," Knezevic says. "They realise that credit cards are costing them."

Since surcharging was allowed, merchant fees for Visa and MasterCard had steadily declined, from 1.45 per cent in March 2003 to 0.86 per cent in last December, according to Reserve Bank figures. (Merchant fees for American Express and Diners Club are much higher.)

However, they have started to rise, moving to 0.88 per cent in March and placing more pressure on firms to tack on a credit-card fee.

Knezevic says the smaller outlets use the fee for cost recovery but bigger companies are using it to add to their margins.

"The small-end-of-town-merchants are purely surcharging to offset the cost of processing, whereas larger merchants ... are actually now surcharging as a source of margin because they can. [And] their surcharges are higher."

The ability to add a surcharge has resulted in a slight decrease in the number of credit-card transactions, the report found.

"These customers are increasingly [moving] to debit cards," Knezevic says.

The report was compiled from interviews with about 2500 businesses.

AAP