Ask LH: Can A Business Set A Minimum Amount For A Credit Card Purchase?

Hi Lifehacker, Quite a few places I visit say they have a "minimum" credit card transaction: sometimes $5, sometimes $10. I've even been to a deli where I was told I can't purchase using a credit card unless it's over $15 — and all you can buy is a pie or pasty and a cake and drink which almost never adds up to the minimum amount. Are they allowed to enforce that at all? Thanks, One Two Fee

Photo: Paramount Pictures

Dear OTF,

The same thing recently happened to me at my local cafe. I initially attempted to purchase a $5 bacon & egg roll and was informed I needed to spend a minimum of $10. I added a soft drink but was still short by $2. In the end, I walked out with a bunch of superfluous crap that cost me a grand total of 15 bucks — $10 more than I'd initially planned on spending. Tch.

So are minimum purchase requirements legal? As we have noted in the past, businesses can specify whatever payment mechanisms they like, so long as it doesn't violate Australian consumer law. Technically, they aren't even obliged to accept cash payments and have the right to refuse service to anyone who won't play by their rules.

While there are stipulations in place to protect customers against excessive credit card surcharges, no such rule exists when it comes to minimum credit card purchases. If a merchant wanted to set a minimum purchase value of say, $100, there would be nothing to stop them (although this would obviously be bad for business.)

Things get a bit more complex when it comes to EFTPOS purchases. Certain banks disallow minimum EFTPOS transactions via merchant agreements that all retailers are supposed to abide by. For example, the Commonwealth Bank stipulates that merchants must not impose any minimum transaction amount for EFTPOS card transactions. (Of course, this doesn't necessarily guarantee that the merchant in question abides by the rules.)

If you desperately need to buy something that falls short of the minimum spending requirement, you could always try pleading your case to the manager. Let them know you understand their position about credit card fees, plead poor and politely ask if there are any other options. The manager may “waive” the policy in order to keep your business. (You can usually gauge whether they're going to be helpful within about five seconds based on their general demeanour.)

If all else fails, your only option is to make up the shortfall with extra products or take your business elsewhere.

Cheers Lifehacker

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    Or pay cash. Unfortunately some places don't have eftpos or even accept credit cards (especially AMEX)

      Coming from New Zealand this was a big surprise. We use eftpos for everything, i'm guessing there are less fee's. Took a me a while to get used to carrying cash.

    It's funny you mention CBA stipulating merchants must not impose any minimums.
    Our bank machines are with CBA and we were told that we couldn't accept anything less than $10 by CBA, this was maybe 4 or 5 years ago now, but we haven't been told anything new since. We're not a super market or the like, so we don't have any products less than $10 anyhow.

    I always wonder why businesses don't bargain with the banks over fees for their machines, to keep business we don't even charge a credit card fee, because we're charged less than a percent by CBA.

    It might pay to try understand why these rules are sometimes put in place. When a retailer processes a transaction they are hit with a lot of fees and charges that can add up to quite a lot. On small transactions like we are discussing, these charges can actually cause the retailer to lose money. So maybe next time you encounter this problem and get upset because you can't buy your pie on a credit card, you should ask do you really want the retailer to lose money because of you?

      The fees for a 5 dollar transaction will not even come close to 5 dollars. As @jengaship mentioned, CBA charges less than 1 percent per transaction.

      In my opinion, specifying a minimum purchase amount for credit card or EFTPOS transactions happens when businesses want to pass on operating costs for services that are increasingly expected these days. I've walked out of more than one establishment because of this practice, and I know I'm not the only one. They're losing more money through lost customers than they ever will through bank fees.

      The common charge is 0.05 a cent per transaction. You have a monthly on going merchant service which is charged on a per terminal basis (last check was like 20 bux) Credit Card surcharges are applied more so by the provider than the bank i.e. Amex/Diners because these are not included in your merchant service (have to deal directly with them to have it added, which of course is an added cost), but VISA and Mastercard are universally accepted.
      Unless you have a seriously piss poor performing business transactions under 10 bux should not be an issue.

        You're way off with your numbers... Here's a breakdown of merchant transaction fees on a credit card:

        1. Payment processing fee - 4c to 15c depending on turnover and supplier of services
        2. Interchange fee (credit card provider) - .5% to 2%
        3. Merchant Banking fee - .5%

        So if your business average basket size is $10 you could pay between 5c and 17.5c a transaction. (With small businesses likely to be at the full 17.5c)

        So a small business with a low basket size (under $10 a transaction on average) is looking at paying a minimum of 1.75% of their turnover to the banks. This is a significant number.

          Really?! 1.75% significant? on a $4.50 coffee? a $3 notepad? a $3.50 cake?!

          I run an online business. I pay $9 postage, which I include ("give for free") in every transaction over $50. That's 18%. That's significant.

          Truth be told, I run the odds that most transactions are well over $50. I don't know why coffee shops don't do the same. The only reason I can give that Australian Retail don't do the same is my behavior ("$5 minimum?! Really, can I just pay a $0.50 transaction fee? no? fine. I'll have this coke too then. BOOM. YOU WIN, I LOOSE.")

          If you're running a business where 2% margin is significant, I do hope you have the turnover of the average supermarket.

      No. They are not hit with a lot of fees. It is a small fee per transaction. Nothing more.

    I was buying fruit and veg in a market and only wanted about $5 worth of items, they had a minimum of $10, I asked if they would waive the minimum they said no, I then asked if they wanted my business or not, all I got was a shrug. So I said I would go across the road to Woolworths, they quickly changed their tune. Woolies and other big chains let you buy even if $1, even 7-Eleven etc.

    I know there is usually a transaction fee each time to the vendor so they must have a pain threshold that says I can afford to pay xx fee for each $10 and above.

    The power of size usually helps with these things.

    I see proofreading really is a lost art at Lifehacker.

    "say, $100, they’d be nothing"
    "you could always try pleasing your case to the manager. "

      Yup. Saw that too. Very unprofessional, but also nothing out of the ordinary for them.

      My apologies for the two errors in this article. We do our utmost to produce 100 per cent clean copy but very occasionally a mistake will slip past us. We're only human after all.

    I didn't say the would be a $5 fee on a $5 transaction. I said the fees would be more than the profit resulting in the retailer losing money. The transaction fees can be up to 5% of the total price plus a fixed 25 cent fee. In addition lets not forget the EFTPOS machine makes a phone call to process the transaction, another 25 cents. Merchants don't get always the same phone bundles as private residents do. So lets say you want to buy something for $2.50 it could cost 62.5 cents just to process the transaction and thereby possibly causing the retailer to lose money every time this happens. Margins aren't that big in retail. Everybody knows retailers' are doing it tough these days, so owenjcooper I suggest you should just keep on walking because retailers can do without such selfish miserable people like you.

      Uhhh... Merchant terminal makes a phone call to process transaction - what year are we in 1995? That would be a tiny percentage of merchants these days. Can you imagine how long queues would be if that happened everywhere?

      No. Visa and MasterCard transactions do not have a 5% processing fee. Are you just making this stuff up for fun?

    If I don't have the amount in cash, and they have a minimum $10 charge, and I want to buy something under that, I offer to pay the merchant fee they're charged for the EFTPOS transaction. If the owner/manager is there, they've always agreed - they add anywhere between 1-2.5% to the cost (about 10-20c). If it's only a general employee, then usually no. Understandable, as they probably don't have the authority. So I need to go elsewhere in those cases.

    Last edited 01/07/14 4:31 pm

    There are folks who will try to buy multiple sub $5 items as separate card transactions, and then ask for gift wrapping and a deluxe bag to show off where they bought the gift. If you work retail at Xmas time, they can be the bane of your life - at least a dozen cases every day.

    To understand Business, you need to be in Business.

    I've always found this to be a weird rule having also come from NZ where for the last 25 years EFTPOS has been ubiquitous and zero fees imposed by the merchants.
    However, what I do if I need to buy something from a shop where they have that rule, is to simply ask if you can pay the processing fee.
    With very few exceptions, the merchant has agreed and the fee tends to be only 50c.

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