You can’t use you card for purchases less than £5

You’ve got to be kidding, right? Apparently not.

There are still retailers with arbitrary rules about how small a transaction they’ll take a card payment for. And it just doesn’t make financial sense.

Last week in a sandwich shop I was told my sandwich and drink wasn’t worth them selling to me if I wanted to pay by card, and I had to use cash or go hungry. Well, they were more polite than that, but that’s what they were effectively saying to me.

Let’s look at the numbers. All card processing companies will take a commission for processing a card payment for you, that’s to be expected. They’re not going to do it for free. So let’s look at how they charge.

Most long established merchants, such as WorldPay, take a fixed amount plus a percentage of the sale value, typically a few pence plus a few percent. A debit card for example might be 5p plus 0.5%. So my £4.50 lunch would cost the retailer 5p plus 2p (0.5% of £4.50), 7p in total. More modern card processors take a flat fee, such as Square who take 1.75%, so my £4.50 lunch would cost the retailer 8p. Surely the margin in sandwiches isn’t that tight that 7 or 8p makes it uneconomical to sell?

Let’s not forget that taking cash isn’t free either. Banks are quite keen to charge businesses to bank physical cash. For example, a traditional bank such as Barclays charges £1.50 per £100 banked. That’s 7p cost to bank my £4.50 lunch sale, the same cost as taking a card payment! Even the startup banks, such as Starling charge to bank cash, but they charge £3 per £1,000 banked. Much cheaper at 1.3p, but hardly the difference between worth selling and not worth selling a sandwich, surely?

Is that few pence cost worth losing a sale for? Would I use that shop again when I’m next in that town, or am I more likely to give it a miss and buy elsewhere?

Consider too your demographic. Who’s your target audience - your sandwich shop sells all the trendy flavoured coffees, so if it’s millennials you’re attracting, they’re the most likely demographic to have gone cash free. So you’re either hoping they’ll spend more, or telling them to bugger off down to the nearest Subway instead, where like most places, there’s no lower limit on card purchases.

With the rise of retailers only accepting cards, and no longer accepting cash, the concept of a minimum limit on card payments becomes even more absurd. What are you thoughts on this, do you find the convenience of cards outweights cash? Would you avoid retailers who insist on a minimum purchase value for cards?


Hmm, I think you have overlooked the fact that credit card companies charge different commission rates according to the type of business. A firm selling 'big ticket' items such as computers or domestic furniture with prices running to hundreds of pounds, may well pay the 1.75% you quote. A business that sells a large volume of low priced items might is more likely to pay 3% or even 4%.

Reply Share