As a business, can you enforce a minimum spend on EFTPOS payments? The short answer is yes – but that doesn’t mean you should.

It is not a legal requirement for shops to accept card payments. Similarly, it is still legal to tell your customers they can’t use their debit or credit card for transactions below an arbitrary amount like $5 or $10.

Businesses can use this rule to encourage customers to spend more money in store, but it can also cause a drop in sales when they prefer merchants who do not penalise low transaction amounts.

If you do decide to have a minimum spend, you should at least do it legally. Let’s see exactly what’s allowed.

The law on minimum EFTPOS spends

What is the legal way to enforce a minimum amount on card transactions in Australia?

First of all, you can flat out refuse card transactions below a specified amount of any size.

Alternatively, you can require that card transactions below the minimum spend incur a surcharge, as opposed to no surcharge above the minimum spend.

If you decide to go for a surcharge below the EFTPOS minimum, you must follow the Competition and Consumer Amendment (Payment Surcharges) Act 2016 that states:

A corporation must not, in trade or commerce, charge a payment surcharge that is excessive. (…) A payment surcharge is excessive if: (…) the amount of the surcharge exceeds the permitted surcharge referred to in the Reserve Bank standard or the regulations.

The Reserve Bank of Australia says:

A merchant cannot surcharge a card transaction at a rate that exceeds the merchant’s average cost of acceptance for that transaction for the relevant card system. The ACCC has responsibility for enforcement in the event that a merchant is attempting to surcharge excessively.

That is, a surcharge is defined as “excessive” if the amount is higher than the annual average of your total card transaction charges paid to your acquirer or payment facilitator. You cannot decide an arbitrary amount to charge for transactions below a minimum spend – it has to be maximum the amount it actually costs you to accept the card.

Should you have a minimum spend on cards?

Based on what we know about consumers, the real question should rather be: is it a good idea to enforce a minimum spend on card transactions?

Australians have got so used to card payments that merchants who do enforce minimum spends or surcharges are often perceived as archaic.

In fact, the whole logic of card transactions being an extra cost to the business does not hold up. While the average cost of accepting cards is typically 1%-2%, the Reserve Bank estimates that the cost of accepting cash is about 2% of the transaction value.

The cost of cash is higher due to the time required to manage it, cash discrepancies, banking, security etc. It simply does not make sense from a cost recovery stance to add a minimum spend or surcharge on card transactions while leaving cash payments free.

Secondly, consumers expect a certain level of service and are more likely to pay for goods when they get to choose their payment method freely and without any obstacles. Rather than confronting the business with minimum spends, people tend to just take their business elsewhere when it’s easy to do so.