Steve Campbell Grant reporting from the field.

St James Credit CardWhen I’m a consumer – nothing annoys me more than signs in private shops that say
“$10 EFTPOS minimum”
It’s plain frustrating that I can’t make my $8 purchase because I have no cash on
me, and because the shopkeeper said so.
Let’s look at these two things a bit closer.
I have no cash on me because I get paid electronically,
because ATM’s are dangerous places to withdraw money –
especially in the CBD – because like everyone else I spend money before I earn it
(see under clever credit card marketing – ahem, Banks!).
Dubious reasons no doubt, but valid ones – at least the first two.

Secondly “because the shopkeeper says so.”
It’s as if at the magic marker of $10 the benefit of having an EFTPOS machine
suddenly kicks in.
So this is where I switch to talking as a merchant.
It’s true – the credit card companies take a slice of every transaction.
They provide a service – they charge for it.
For EFTPOS transactions on savings and checking accounts the surcharge is a flat
For credit cards the likes of Visa and MasterCard the surcharge to the merchant
is 0.0890% of the transaction. Famously – the surcharge for American Express is
about twice this.
The high cost of American Express is about 0.178%.
But – what does all this mean – in reality?
What would happen if I accepted a transaction for less than the
mystical figure of $10?
The world would collapse?
London would call with news of the demise of the FTSE 100?
No, no such thing would happen.
An $8 transaction will cost the merchant extra. Simple.
But how much extra?
Say the item costs $5 – and has a 60% markup – so is marked as costing $8.
You sell it for cash you make $3.

You sell it St James Credit Card2.with the Merchant service you offer – the $5 cost rises to

$5.22 for EFTPOS,

$5.07 for Visa/MasterCard,

$5.14 for Amex.
Your profit goes down – as far as $2.88 – which is not really that much!
But rather than plaster signs around proclaiming
“EFTPOS minimum $10”
Wouldn’t it be simpler to absorb this cost in your prices?
That way no-one growls about your added fees as a merchant.
And the merchant doesn’t come across as being petty.

And the consumer is more likely to return to your store.
It all happens at the point of sale.

PS Placing such signs around a shop is not strictly illegal, but I
think such a practice leaves a bad taste in consumers mouths.