Q: I would like to report this store in my town for violating the law about minimum purchase amounts. How do I do this? What they’re doing is illegal, right?
A: This topic has been brought quite a few times on Credit Card Forum. There has been a lot of misinformation out there about this and now that the Dodd-Frank Wall Street Reform and Consumer Protection Act in effect, there is even more confusion about minimum purchases for credit cards.
As of 2015, the law allows merchants to set “up to” a $10 minimum, as long as they treat all cards the same regardless of brand.
How it used to be…
For starters, there was never a credit card minimum purchase requirement. It was never illegal for a store to set a minimum. However, doing so was blatently against their merchant agreements with Visa, MasterCard, American Express and Discover – all of which said a minimum purchase amount was not allowed.
If a business violated that rule, a customer could call up Visa/MC/Amex/Discover and report them. However in the several years leading up to the reform, they were very lax in enforcing this rule when a complaint was received.
How it is now…
An amendment of the Dodd-Frank reform went into effect in September 2010 that made it legal for businesses to set a credit card minimum purchase amount. Here’s the law so you can see for yourself:
(3) LIMITATION ON RESTRICTIONS ON SETTING TRANSACTION MINIMUMS OR MAXIMUMS. (A) IN GENERAL.—A payment card network shall not, directly or through any agent, processor, or licensed member of the network, by contract, requirement, condition, penalty, or otherwise, inhibit the ability (i) of any person to set a minimum dollar value for the acceptance by that person of credit cards, to the extent that (I) such minimum dollar value does not differentiate between issuers or between payment card networks; and (II) such minimum dollar value does not exceed $10.00
This might be beneficial for small businesses that were sick of processing fees, but for us the consumers, the drawback is that now we can’t always use our credit cards for small purchases. However don’t panic – the law has been in effect a while now and I have yet to encounter any changes. For example, the dry cleaners down the street from me still has their sign on the counter stipulating a minimum amount for credit card transactions, the only difference now I guess is that they aren’t breaking the rules by doing it. I have yet to come across any new businesses implementing minimum purchase amounts.
I see big businesses encourage credit cards for small purchases
Small businesses often complain about the processing fees, but if they were smart, they would realize it’s sometimes worth the cost. Why? Because those customers paying with credit cards are likely to spend considerably more than they would with cash, certainly more than enough extra to offset the swipe fee, anyway.
For example, when McDonald’s started allowing credit card payments, they found that the average purchase size increased from $4.50 to $7.00 (source: NPR). A broad study across multiple industries conducted by Dunn & Bradstreet found that purchase sizes were 12% to 18% more when paid for with credit card. This is why all the major fast food joints actually encourage and promote credit card payments.
If the cost of goods is low (i.e. convenience store cup of coffee) and it was my business, I would rather take the hit on the fees if it meant selling an extra-large $1.99 coffee instead of the $1.29 size. That’s just my two cents, anyway.
A credit card minimum purchase requirement of $10 or lower is allowed now, so make sure you keep some cash in your pocket just in-case. And I regularly run into merchants in Southern California who try and impose a higher threshold (like $15 or $20) and when I explain to them it’s not allowed, of course the employee doesn’t seem to know or care what I say. It can be frustrating!
Written or last updated August 31, 2015