NSW taxi users will soon have to pay smaller fees when they pay for a cab by credit card, under reforms announced by the O’Farrell Government on Tuesday that will cost the Cabcharge company millions.

Following a similar move by the Victorian government, Premier Barry O’Farrell and Transport Minister Gladys Berejiklian said they would legislate to cap the maximum card surcharge for paying for a taxi at 5 per cent, down from the typical 10 per cent.

Taxi surcharges halved: Barry O'Farrell. Credit:AFR

Mr O’Farrell and Ms Berejiklian also said on Tuesday they would "encourage" but "regulate" the use of new mobile phone apps that allow taxi customers to be directly put in touch with taxis.

"I’ve heard the concerns of customers that they’ve been taken for a ride by this excessive surcharge and that’s why we’ve listened and acted," Mr O’Farrell said.