The Random Thoughts of a Geek heading for Banbury
The Random Thoughts of a Geek heading for Banbury

Minimum card transactions and why they suck

Credit card machine

Even before Covid-19 took over the UK, and caused people to not want to handle cash, cash has been falling out of favour for years, the BBC reported on this back in 2019, and produced the following chart:

I have a Monzo bank card, and am very happy with it as my main account, and integration with Apple Pay, meaning that there is no requirement for me to carry cash ever (I very rarely even bother with my wallet). So less than 99.9%1 of the time I have no cash on me2.

Also in 2019, the Payment Services Directive (PSD2) came into legislative effect in the UK, this directive made it illegal for any business to charge extra for using a debit or credit card in the EU (Including the UK).

This directive has already been incorporated into UK law, following a vote in parliament. As such it will therefore remain law even if/when the UK leaves the EU.

One of the things it didn’t address was business, retailers, merchants (or whatever you would like to call them) from imposing minimum card payments3.

However, there are rules set out by card networks which explicitly state that any merchant accepting their cards cannot set a maximum or minimum limit. Setting a minimum spend on card payments is a violation of these rules and can result in a hefty fee or account suspension.

MasterCard, states in their rules (page 108), § 5.11.3:

“A Merchant must not require, or indicate that it requires, a minimum or maximum Transaction amount to accept a valid and properly presented Mastercard or Maestro Card.”

Mastercard, Setting a Minimum or Maximum Transaction Amount

Visa’s official rules (page 101), § stating:

“A Merchant must not establish a minimum or maximum Transaction amount as a condition for honouring a Visa Card or Visa Electron Card.”

Visa Europe, Visa Core Rules

Card reader companies are similarly bound to the Card Scheme rules of any card network they are designed to accept. If the card reader provider discovers that a business has been breaking these rules, they can suspend its account.

Having said that, these rules are rarely enforced and merchants do not distinguish by card network when outlining their minimum spend for card payments.

So why do some businesses set a minimum card payment?

One of the most common reasons for implementing a minimum spend on debit cards is to avoid paying ‘processing fees’. However, this is based on faulty logic. Processing fees vary from provider to provider and while some have fixed rates for every transaction 4 most fees are taken as a percentage, so every charge is proportionate to the total cost of the sale.

With contactless transactions now making up most of the debit transactions there is no need to carry cash, and the card fees make up a business cost, same as Electricity, Gas, or Business rates, and should be bourn by the retailer as part of providing the service.

  1. 99.9% is 10m 4 seconds in a week
  2. I even tried paying for a Car using contactless, but the PED didn’t support contactless
  3. Minimum card payments, or minimum card spend, is the lowest amount a customer can spend before a retailer will accept a debit or credit card payment. In most cases, you’ll experience minimum card payment in shops that are independently run, such as local shops. normally, the limit will be set at around £5
  4. making a significant dent in the margins of a £1 purchase

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