Mastercard campaigning to end $10 minimum for card purchases

Sally McMullen 26 October 2016

You're not the only one who is sick of those pesky minimum transaction amounts at the cash register.

Mastercard is fighting to put an end to minimum $10 purchase restrictions some cardholders are forced to pay when using their card at the checkout. In a society that is becoming increasingly cashless, it's no surprise cardholders are frustrated when confronted with a $10 minimum transaction limit when paying on card. Under its Zero Minimum campaign, the payment network is aiming to put an end to some of these frustrations.

To determine how Aussies feel about being charge extra for using a card to make everyday purchases, Mastercard interviewed around 1,000 Australian cardholders for the campaign. From the survey, it discovered that 72% of Australians prefer to use card for most transactions, including small purchases. It makes sense then that 62% of participants admitted they found it frustrating when they couldn't use their card for smaller transactions, with 82% resenting instances when they have to meet a minimum transaction fee when paying on card. While many merchants would believe that enforcing these card minimums would result in higher revenue, it's actually hurting their business. It turns out that 2 in 5 Australian cardholders avoid stores that charge card minimums and don't provide payment options outside of cash for low-value transactions.

It may only seem like a small loss when you're at the checkout, but Mastercard also calculated how much money Australians are losing by falling victim to the minimum spend trap. Say you purchase a $4 coffee twice a week but are required to spend an additional $6 each time to meet the minimum $10 transaction amount. If you added up this amount over a year, you'd be wasting $624 to meet minimum transaction amounts annually.

Generally, these $10 card minimums are usually enforced to cover the fees that banks charge to process payments. These standard fees usually include:

  • One-time fees such as terminal establishing fee, closure fee and on-site installation
  • Ongoing fees like credit card transactions, which are usually a percentage of 0.5-3% of the transaction amount
  • Merchant service fees on credit card transactions
  • A standard fee per Eftpos transaction, which tends to be around 10c to 50c

So, while there is still a fee to cover, a $10 minimum transaction seems a bit excessive. It's also no secret that the Reserve Bank of Australia (RBA) has been monitoring the use of excessive credit card surcharges and interchange fees to protect consumer's wallets. As of 1 September 2016, the RBA enforced a ban on excessive credit card surcharges. Under the watch of the Australian Competition and Consumer Commission (ACCC), merchants and organisations have been forced to tighten interchange fees caps to 0.8%. This means that organisations are losing money they previously made on interchange fees, which could be why some merchants are still enforcing minimum transaction amounts for customers paying on card.

While Mastercard is encouraging merchants to sign up to support the Zero Minimum campaign, there's no sign that a ban will be enforced any time soon. In the meantime, you might want to start carrying around change to pay for that morning coffee if you're stuck with that minimum.

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One Response

  1. Default Gravatar
    LironOctober 26, 2016

    Instead of pointing the finger at small businesses, what could they do, and not just them, but everyone, to fix this problem?

    I hate the $10 minimum, and I’ve recently stumbled upon a business with a $25 minimum! But if a merchant is charged 30c for EFTPOS on a $3 coffee, that’s 10%, and on a $1.50 newspaper, that’s 20%. Add 20c if the merchant still has a dialup EFTPOS terminal, and it jumps to 33% on a newspaper. Can you blame them?

    Some banks and other service providers still operate this way. Many of the underlying interchange fees operate this way as well, and it’s only going to be more so given that the emphasis by the new standards is on fixed fees. So what can we all do, including business, the banks, other service providers, card schemes, the government, EFTPOS and even Mastercard, do to make this problem history?

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