Can shops really set a minimum card spend? – Op Ed

By Callum Richard, a UK-based copywriter and law graduate, with a background in the legal and banking industries. Having worked in the Intellectual Property department of a leading firm of solicitors, he has a broad experience of brand protection and development, the luxury sector, and financial management.

If you’ve been shopping recently, the chances are that you’ll have used your credit or debit card – and maybe even have tapped on a contactless card reader. The use of credit and debit cards in place of fast-declining cash is a cornerstone of the UK’s economy, with debit cards having overtaken physical money during 2017 to have the most transactions by volume. But what happens if a shop won’t accept card payments unless you spend a certain amount?

With the EU’s Payment Services Directive (PSD2) now in full effect, the difference between a card surcharge and a minimum spend limit could have a significant impact. Read on to find out what your rights are and whether you could be losing out by insisting on your own minimum card spend limit.   

What are minimum card payments? 

A minimum card payment, minimum card spend or minimum card limit is the smallest amount you can spend before a business will accept payment via debit or credit card. Minimum card payments are most commonly imposed by small, independently run businesses and are generally set at approximately £5 but can reach much higher levels. 

Why do some shops have a minimum spend on card?

There are many explanations why shops might set their own minimum spend limits for card transactions, but some make more sense than others.

A common reason for implementing a minimum card payment amount is to avoid the cost of processing fees. Whilst most consumers will accept this as logical, it’s worth keeping in mind that most processing fees these days are calculated as a percentage of the individual transaction and so the amount charged will always be proportionate to the total spend.

Time is money, and businesses also frequently cite queue time as reason for setting a minimum card spend. This is because they believe that it’s much quicker to take cash than it is to deal with a Chip and PIN payment – especially when there’s a small spend involved. This is certainly an excuse that would’ve held water in years gone by, but with widely available contactless payments, taking cash could actually be the factor that leaves customers queuing for longer than they need to.

Is setting a minimum card spend legal in the UK? 

To answer the big question, yes, it is legal to set a minimum card spend in 2020 Britain. There are currently no laws that prevent businesses from setting a minimum spending limit for card transactions.  

That being said, there are some rules set out by the major card networks which prohibit merchants that accept their cards from setting minimum and maximum limits. Visa (who operate the popular visa card and visa electron card networks) and Mastercard (who operate the Mastercard and Maestro card networks) both enforce a rule against establishing any minimum or maximum transaction limits. Any businesses that do set a minimum card limit risk being penalised by their card services provider, which could result in them losing out on future trade from customers using those cards. 

Are card surcharges legal in the UK? 

A card surcharge is different to a minimum card payment, and involves a business charging their customers more simply for paying by card. If a business sets a surcharge, it will generally be applied if you pay by card, regardless of how much you spend with them. Card surcharges originally existed to help businesses account for the costs of card processing – but the law has since moved on and they are now illegal. 

As of January 2018, the EU’s Payment Services Directive (PSD2) has outlawed the practice of businesses charging more for customers who use a debit or credit card. In the past, card surcharges were accepted as the norm but now they are the subject of frequent action by Trading Standards officers and local authorities up and down the UK.  

With the UK now having left the European Union, some businesses raised the question of whether PSD2 and its ban on card surcharges still have effect. Fortunately for consumers, the UK parliament voted on the law back in March 2017 and so card surcharges should remain a thing of the past even despite Brexit having gone ahead. 

Why setting a minimum card spend could damage your business

Whilst setting a minimum card spend might seem like a sensible choice for some smaller businesses, doing so could leave you out of pocket and with a shrinking list of regular customers. Cash machines are vanishing from Britain’s high streets at an alarming rate, and making it more difficult for the public to spend with your business is unlikely to encourage brand loyalty.

As the economic effects of the COVID-19 pandemic begin to bite, it’s also clear that the public are less inclined to use cash than ever before. A survey from cashpoint operator LINK showing that 54% of people surveyed were actually avoiding physical money, whilst COVID-secure contactless payments have seen a huge rise. At a time when cash is on the decline, making it harder for customers to spend in other ways could be counterproductive and leave them seeking out a competitor who accepts card payments of all kinds. 

Fortunately, however, there are options out there for businesses who decide that now is the time to invest in a better payment solution. Merchant services provider UTP Group, for instance, offer a full range of contactless-enabled Ingenico card readers and mobile card machines. There’s good news for those small businesses who might think to impose minimum card spends for cash flow reasons, too. With a same day funding package, opting for a merchant services account with UTP could see money hitting your account within just hours of a customer transaction.

There was a time when setting a minimum card spend or even a card surcharge were widely accepted business practices. With changes to the law and even to consumer opinions, however, failing to adjust and adapt could leave your business losing out to better-equipped competitors.