MY MONEY

Minimum-spend madness and how to beat it

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It's one of the strangest and most inexplicable elements of consumer markets you can witness: shops and other retailers demanding a minimum spend on credit and other cards.

What makes it even more amazing is that some people - and I've witnessed a few in cafes of late - are quite prepared to pay for an unwanted muffin with their coffee to meet the $10 hurdle.

To be charitable, and these minimum spends are anything but, it's perhaps due to merchants' ignorance or oversight of the costs of accepting cards and other payment systems.

It's totally legal and merchants are within their rights to make such conditions of payments, but are they sensible?

There are costs associated with all payments including cash. The Reserve Bank has put it at 2% for accepting actual money once you factor in time, banking and security.

But because banks send in regular accounts for the fees and charges related to card acceptance, terminal rentals, and so on, these costs are far more visible to the merchant. (Unlike the minimum spend signs often tucked away near the till.)

This has seen shops - unwisely in my view, as it's an affront to real customer service - hit consumers with very unpopular credit card surcharges.

So they might think: why not insert, sometimes alongside a surcharge, an arbitrary minimum charge, usually of $10, that can apply to both credit and EFTPOS cards?

Well, here's a simple reason why not: it's lousy for your business. Fewer people are using cash and more are using cards and other payment systems such as mobile phones.

Research by MasterCard, which is behind a "zero minimum" campaign, shows 84% of us resent these restrictions and 44% avoid such shops altogether.

All this suggests you have to sell an awful lot of unwanted muffins to cashless customers to make up for the lost business. It could be another motivation for the minimum to get people, albeit unwillingly, to buy more stuff. If it is, common sense suggests dialling down this strategy and focusing on customer service.

As for us consumers, we have a choice beyond disliking and lumping the minimum spend. We can carry cash for small payments to avoid the inconvenience and extra cost.

Also we can patronise those shops that have no minimums and politely tell those that do why we no longer use their services.

We are in an era of unparalleled consumer power and new technologies, and the minimum spend is an old-school and self-defeating barrier to providing great service.

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Christopher Zinn is a consumer campaigner who works in the marketplace of consumer empowerment. He runs Determined Consumer.
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