Why the $5 minimum for credit cards

UPDATE: In response to the feedback we received from our customers, we decided to drop the $5 minimum for credit card transactions. We want The Chai Cart to be a place where customers feel happy. We realized that the stress of having cash to get chai was going against the experience we strive to provide everyday. 

--------

We use Square as our POS system and credit card processing service. Square charges a flat 2.75% fee for every credit card transaction (if a credit card is swiped, else it's more). Many of you know this and some of you are reasonably upset that we now have a $5 minimum for paying by credit card. So why are we imposing a minimum when Square does not charge extra for small transactions?

Here's why:

San Francisco is becoming increasingly expensive and this impacts the cost of doing business, too. The cost of organic milk has gone up by 15% and our parking lot (for the carts) has raised the rent by 15%. I looked into areas we could save to offset the rise in expenses. Reducing our credit card fees seemed like an easy way to cut costs without compromising the quality of our ingredients and without raising our prices. As 90% of our transactions are below $5, incentivizing customers to pay us cash seemed reasonable to us.  

Food businesses run on very low margins. The 2.75% fee may seem small for one transaction, but over the month and year, the fees add up to a substantial amount. The savings we expect from credit card fees can cover the increased cost of parking, only one of our many growing expenses.  

We appreciate your continued support for our business. 

1