Can shops really demand an EFTPOS minimum spend?

Walk in to a convenience store and chances are you'll be greeted by a sign that reads: "$10 minimum spend for EFTPOS".

We've all seen these signs but have you ever questioned them? To make matters worse, as well as EFTPOS minimum spend signs, some retailers charge an EFTPOS fee.

Money reader Brad from Queensland wrote in some time ago about this very issue.

Short for electronic funds transfer at point of sale, EFTPOS allows you to buy items using your own cash, plus take cash withdrawals at the same time.

Your bank can charge you an account fee if you exceed a certain number of transactions a month, but generally EFTPOS transactions are supposed to be free.

Not so!

Brad says that depending on where he shops, he can be charged up to $1 surcharge for using EFTPOS.

"To purchase Money magazine using EFTPOS at a newsagency I was advised that I had to purchase items to the value of $10, so I decided to leave.

The next day I tried another newsagency and they wanted to charge me 20 cents for using EFTPOS. I've even had a retailer wanting to charge me $1 to pay with EFTPOS for a $9 transaction."

Can retailers really stipulate a minimum spend when you buy through EFTPOS and, more importantly, can they charge us a fee? For Brad it's more a case of lack of clear regulation.

"It frustrates me that a retailer can make up their own charges or possibly make a profit for providing this service. What are these retailers actually being charged?"

Unfortunately, a chat with Katherine Lane, principal solicitor at the Consumer Credit Legal Centre in NSW, reveals that retailers can indeed enforce minimum spends when it comes to EFTPOS transactions. She says no merchant is required by law to use EFTPOS, and they can insist on cash payment whenever they want.

And while EFTPOS Payments Australia obviously doesn't recommend or support surcharges on EFTPOS, it too notes that merchants can make their own decisions.

As for why a minimum spend of $10, according to some banks it's more of a hangover from an old pricing structure. It was quite common for retailers to be charged a flat fee per EFTPOS transaction, so on small purchases this fee represented a high proportion of its revenue.

These days merchant fees tend to be charged as a percentage of the value of the transaction. However they vary depending on the industry and the turnover and volume of usage of the terminal.

But a $1 EFTPOS fee for a $9 transaction is clearly a rip-off. According to Merchant Link, a provider of EFTPOS terminals, EFTPOS fees can vary between 5 cents and 25 cents for each EFTPOS transaction.

It is not common to be charged a surcharge fee on EFTPOS transactions as opposed to credit card transactions and I'm yet to be charged one.

Lane says the changes allowing the charging of fees for EFTPOS transactions by merchants have been a step backwards for consumers.

"We have to be constantly alert for a fee that may be charged," she says. "Worse, the fee varies greatly between merchants."

When surcharging on cards was introduced back in January 2003, as a result of Reserve Bank reforms, it was supposed to have the effect of getting consumers to use EFTPOS instead of credit cards, as it was assumed fees would not be charged for EFTPOS (it is a cheaper payment method for the merchant).

The problem, says Lane, is that if you allow the charging of fees, merchants will charge as much as they can. "Unfortunately, it has to be expected that as time goes on, more and more merchants will charge fees or more in fees."

Brad, the best tip I can give you here is one you actually gave me: "Can you give me a good deal on a subscription so I don't have to experience this again?"

Absolutely! The next issue of Money is on its way. For the rest of us, it's a matter of taking our business elsewhere.

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