Advice: Credit/debit minimum purchase price?

[AugustonCoffee]

Hi everyone,

Our little cafe is coming up on it's 1st anniversary, so I'm doing a review of various areas of the business to scrap things that aren't working & see if there's potential to copy things that *are* working.

One of the debates my wife & I are having right now is regarding a minium purchase price for customers using debit/credit.

My wife is 100% in favour of a minimum purchase price of $5, whereas I'd be more in favour of a $4 minimum. We have a number of drinks that come close to the $4 price point, so this may generate more sales for our cheaper food items.

My questions:

1. Do you have a minimum purchase price for your cafe?
2. If yes, why? If no, why not?
3. If yes, what is your minimum purchase price?
4. If/when you implemented it, how did your customers react?

Thanks! I look forward to hearing some thoughts on this!!

 

[sidg]

I don't have a minimum as I use square so all the payments percentage is the same for any size order. For me the question is how many orders will you potentially lose by setting a minimum? Most people will throw something on to get to the minimum the first time but will they come back and do it again and again. Are your orders consistently under 4 or 5 that you might be able to bump up with some placement of cookies or muffins close to the registers to get over that price point without alienating potential returning customers?

 

[Mr.Peaberry]

I think sidg nailed it. I hate businesses that charge a fee for using a credit/debit card and will avoid if possible. I think the solution is like sidg said, focus on upping the average purchase with great placement and marketing. Give out punch cards for purchases over a threshold amount which can be redeemed for merchandise or menu items. Encouraging spending is MUCH more consumer friendly than penalizing those who only come in for their daily cup of coffee. You lose the regular customer, and gain the random customer who will buy more than they intended walking through the door and then never return.

 

[AugustonCoffee]

Thanks both of you for your input! When I say "I'd be more in favour" it would just to keep my wife quiet... haha, and I'm on the couch tonight.

I'd say it's about 5% of all orders are under a $5 threshold and since our debit/credit-to-cash rate is 50/50, I'm inclined to keep everything as is. @Sidg, I use Square as well, but strictly use the app for sales tracking. Would you mind if I PM'd you some questions?

 

[sidg]

Feel free to message me

 

[John P]

Auguston,

Regardless of what others do, once you agree to take any credit card, you cannot have a minimum purchase. It's a stipulation by every card company in their agreements whether it be Discover, Amex, Visa, MC, etc. as part of your ability to "take" (process) their cards.

So, even though you see places advertise a minimum, you have no right to ask for one.

As mentioned, use Square or similar like Intuit's processing.... and you will never be nickel and dimed over swipes or anthing else. Flat rate. No additional fees. And you don't have the awkward moment where you try to tell someone you won't take their card (which, as I explained, you really can't do)

 

[AugustonCoffee]

Hi John, thanks for your input. I know there's great debate about this in Canada, so I'll do some investigating. I'm not leaning in that direction anyway, but it's good to have info like that if I need to argue avoiding minimum purchase price more. I know of some businesses in Canada that have posted signs that they refuse Interac/Credit on purchases below $5.

 

[sidg]

Hey John P I know the law used to allow credit cards to keep shops from setting a minimum in the US but I believe that changed with the consumer credit card law update a few years ago. I could be wrong but I think that shop owners now have more flexibility. I know before the law change I had someone tell me that if you ever went into a store that wouldn't take your card because of a minimum that you could call the customer service number on the back of your card and the credit card company could simply turn off that stores ability to accept cards. Now I don't know if it was true but I do remember having the conversation with a store owner who wanted to make me buy a minimum and they were willing to waive the minimum for me that one time.

 

[Musicphan]

Most card brands require merchants to accept all transactions regardless of transaction size. I don't think this has changed. Regardless... if we are talking less than 5% of your business. Do you really want to be known as the shop that is unfriendly and requires a minimum? Spend your time and effort on improving your quality or up-selling an item and this would be a non issue.

 

[sidg]

Not to be a stickler but the law did change in 2010. I took the time to look it up. A merchant may set a minumum purchase amount of up to $10 for credit card purchase as long as all cards are treated equally. A merchant CAN NOT set a minumum purchase for a debit card. (all of this applies in US other places probably have different laws)

 

[Musicphan]

Not to be a stickler but the law did change in 2010. I took the time to look it up. A merchant may set a minumum purchase amount of up to $10 for credit card purchase as long as all cards are treated equally. A merchant CAN NOT set a minumum purchase for a debit card. (all of this applies in US other places probably have different laws)

I stand corrected... here is the doc for VISA. I had a discussion with my card processor contact... clearly he was wrong!

https://usa.visa.com/dam/VCOM/download/merchants/minimum-transactions-credit-card.pdf

 

[John P]

Good to know, Musicphan.

But as you correctly pointed out... Is it ever a positive practice?

And for discussion...

Now, with SQUARE and similar, it's an irrelevant discussion. But with everything else, it would be "Do I make a zero dollars, or do I make a sale and it cost me a few extra nickels?"

And would someone really ask, "Is that a credit card... Oh? Can't take that. Cash or Debit." And unless the vast majority of your beverages are priced above the minimum, I wouldn't think about it.

In the big picture, it's a "cost of business" / pricing issue. If rather than pricing a latte at $3.90, price it at $4.00. Take a realistic assessment of all costs making drinks, and price accordingly.
Also, for anyone that has employees, especially young ones... good luck.