I'm pretty sure it's not illegal, but the card companies require it, or they'll stop letting that establishment use it.  In a way, I suppose that's actually abuse of monopoly now that I think about it...

Our store gives 2.25% for each CC transaction. We don't add 2% to the total, but I can see why stores would start doing that, especially if credit is the future and fees increase. 

Credit card fees aren't illegal, but it is illegal for a businsss to charge higher fees than what the business occurs to the business. (If it costs them 1c, then can either pass it on, on not charge the customer for it, but they cannot charge the customer 2c for that).

And it's also very hard for businesses to actually know how much the fees they get are, so legally cannot pass it on, because they could be overcharging for credit card fees.

Plus it's also immoral. Stores such as PCCG have no credit card fees, but shops like centrecom have some items a couple of dollars cheaper, so you go with them,  but they charge 2% card fees. So people will go with them assuming it's cheaper, when it's not, and is actually a little more.

You can’t really fault stores for doing that. Cash is cash. No one demands a transaction fee on it, but no one uses cash anymore. 

A business sets up a system. Merchant takes a cut, POS service takes a cut, etc. and there’s nothing they can do. 

They as a business will not want cash, as that is a liability (someone could steal it, the cashier could count it wrong...). They cannot make it an off the books sale, because their payment system is still digital, so they don't *save* 10% from not reporting that sale to the ATO.