Minimum credit card transaction

I have just done an analysis of a clients of ours EFPTOS and this question which is  a difficult question, that all retailers face, was should they set a minimum credit card transaction? It gets more complicated with EFTpos as some banks in their merchant agreement state that a merchant cannot set a minimum EFTPOS transaction. So if you do make a policy, I suggest you check with your bank first. Still if you are thinking of setting a policy, note that cash is not free either of costs at the point of sale either. Anyone handling cash has labour charges, often processing fees in the bank, internal administration charges, theft, wrong changes, etc. I am sure if you add it up you are looking at least a percent or two lost no matter what way you go.

Still now most stores set a $10 minimum, and they do charge a surcharge but of course their customers are also within their rights to take their business elsewhere. So a client asked me to look at their current situation, which has a policy of no minimum spend and a 20 cent surcharge.

Here is what I found.

Under $20 they did 4527 transactions in a year for a total value of $26,120.35 about 7.9% of these were using some form of electronic payment, e.g. VISA, EFTPOS, etc.
Under $10 they did 3461 transactions in a year for a total value of $11,761.59 about 6.3% of these were using some form of electronic payment.
Under $5 they did 2521 transactions in a year for a total value of $5,129.61 again about 6.6% of these were using some form of electronic payment

As you can see the percentage using it, is not particularly different at small transactions, although it's clear that almost all customers prefer to pay cash at low amounts but the problem appears to be that sometimes the customer does not have the money. They have say $20 in their pocket, before they come. They go to a shop and buy a few things and their cash is gone so if you have a minimum spend, after that they cannot buy from them. Some get upset because of this, then this maybe another cost too.

As such I recommended that this client keeps his existing policy in place of no minimum spend and a 20 cent surcharge. I will discuss the effect of the surcharge on sales in another post.