Debit and credit card surcharges will be gone by October under Reserve Bank reforms, with big banks likely to foot the bill for the cost-of-living measures.

The new rules, announced on Tuesday, will enable businesses to remove added fees on Mastercard, visa and eftpos card payments.

It is expected the reforms will eliminate the fees charged by about 16% of businesses to cover the cost of accessing transaction services. Consumers pay about $1.6bn a year in surcharges, the RBA estimated in its final review.

The RBA will also lower the cap on fees issuers such as banks can charge businesses, saving businesses an estimated $910m a year.

The treasurer, Jim Chalmers, said the RBA’s changes would help with the cost of living and could be made without parliament taking action.

“Australians hate paying these charges,” he told reporters on Tuesday.

Payment schemes will still cost money to operate and businesses will still have to pay providers. Without access to surcharges, shelf or menu prices would likely have to increase, with prices likely to lift by a one-off 0.1%, the RBA estimated.

The Australian Hotels Association criticised the ruling, with the chief executive, Stephen Ferguson, saying it wouldn’t make the typical coffee or beer any cheaper.

“What was the purpose of the whole exercise if it wasn’t to decrease costs for consumers?” he said.

Australians have told the RBA they would prefer to know the final price, even if it was higher, instead of being caught with a hidden fee.

Most consumers believed they were only sometimes or rarely notified of surcharges, a survey conducted for the RBA’s review found. Three in four respondents thought surcharging was unnecessary and should stop.

Banks and some companies have argued surcharging is necessary to cover the complex costs of the payments system, including credit cards and rewards.

While consumers, small and large businesses and card networks would likely benefit, banks are set to lose out on the revenue from charging businesses, the RBA’s review found.

Some banks had suggested they would have to hike credit card fees and interest rates while slashing rewards and points. The RBA found this would be an intended consequence of the reforms, as debit card surcharges were already subsidising the rewards accruing to credit cardholders.

Smaller non-bank payment service providers Square and Tyro welcomed the reforms, with Tyro’s chief executive, Nigel Lee, saying the increased transparency would make it easier for businesses to pick a provider.