Why do small merchants charge an extra 30 cents for small amounts paid by credit card?

Here in the US, stores sometimes charge such a fee for small credit card purchases. Not as much as they used to, I think. And some refuse to accept credit cards for small purchases.

When I had a small retail business. the fee to process a credit card payment was, I forget the exact numbers, but like 30 cents plus 2% of the charge. The important point being, it wasn't a flat percentage, it was a percentage plus a small amount. For a $1,000 charge that extra 30 cents was trivial. But for a charge of a dollar or two it was a significant percentage. Maybe it's different in Australia. I'd expect the fees to be different depending on what credit card company you're working with.

Unless the merchant actually incurs that fee, this practice is illegal in Australia. These days, EFTPOS fees for mainstream credit/debit cards are a small percentage (1-2%) of the amount, without any flat fee on top, and the merchant may only pass on the actual amount, not more.

Amex and similar non-bank cards are exempt from this law.

For details see https://www.accc.gov.au/business/pricing-surcharging/payment-surcharges/qa-payment-surcharges

This linked site even gives an example of when this law is broken when buying a coffee for $4.00 and being slugged a 50¢ processing fee.

The Australian government takes this kind of extortion seriously. The penalties currently listed on that site are:

If we believe that a business has charged a payment surcharge which is excessive, we can issue an infringement notice to the business:

• 600 penalty units ($133 200) for a listed corporation
• 60 penalty units ($13 320) for a body corporate
• 12 penalty units ($2 664) for a person other than a body corporate.

We can also take court action against a business, in which we can seek pecuniary penalties:

• 6,471 penalty units ($1 436 562) for a body corporate
• 1,295 penalty units ($287 490) for a person other than a body corporate.

It’s payback time!

I ran a small business in the UK some years ago, when charging extra for credit card transactions was legal. We used to charge an extra 50 pence for transactions under £10.

We did this, not because the card charges were that much (as I recall, we paid 1.5% for all values, or 15p on £10), but because we could.

Margins are tight on small businesses. Every little helps. This was a small contribution overall.

FWIW, my staff were instructed to waive the fee if anyone questioned it, but nobody ever complained.

Many small businesses are still on old EFTPOS contracts where they are billed the flat fee per transaction, so they pass it on. I've helped a few family friends and local businesses switch to more modern transaction providers that don't charge flat fees.

Every one of these businesses had different fee structures because it used to be standard for the bank to individually negotiate each EFTPOS agreement, and would frequently stick small businesses with flat fees that larger businesses did not need to pay.

As for the other answers saying charging a flat transaction fee is illegal, this is false. It's illegal if your transaction fees don't reflect your actual costs. If your contract with the bank specifies flat fees, it's legal to pass them onto the customer

That's right. 1.5% is the unwritten rule for leased PDQ machines. In the UK, I've worked with about 6 or 7 retailers and all of their card terminal suppliers have the same charging rate. It was typical for business to charge anywhere from £0.50 to £1.00 as a "card usage fee" where the transaction was below £5 or sometimes even £10.

In 2017, the EU banned this practice, while the UK was still abiding by EU law post-Brexit however a lot of companies got around this by changing the word "card charge" to "service charge" which is to imply you are being charged for their service to process your card (which may not be any effort at all).

Lesson learned: financial institutions will always be quick to get around the law when it threatens their revenue.