Credit Card Minimum Purchase Law?
Q: I would like to report this store in my town for violating the law about minimum purchase amounts. How do I do this?
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.
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 Chinese-run 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 like to whine 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 buy more.
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.
Conclusion?
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.
Don’t be confused. The law (3) above, in effect:
1. ALLOWS merchants to create minimum credit-card purchase limits (up to $10)
2. ALLOWS merchants to set minimums (of any amount) for debit-cards.
@carol and ken, the minimum purchase amount ONLY applies to CREDIT card purchases and NOT DEBIT card purchases as further explained by VISA:
http://usa.visa.com/about_visa/ask_visa/index.html
I own a used bookstore in a small town that accepts credit/debit cards. Merchant processing fees are a cost of doing business and we recognize that cards are convenient for many of our customers, especially travelers.
However, it is incredibly frustrating to deal with certain customers who only ever buy one $2 book at a time, multiple times per week, and use their plastic every time. For years we resisted saying anything, but about six months ago we finally put up a sign asking customers to help us keep our prices low by refraining from using a card on purchases under $10.
Many customers don’t realize that merchants pay a flat fee, a transaction fee, a monthly fee, and additional fees for rewards cards, every time we swipe a card. Almost every customer that we’ve explained this to, understands where we’re coming from.
In six months we’ve had one person who left without making a purchase because we asked them if they had another form of payment. I think if you enjoy shopping in a store and they ask you to work with them on payment method, why wouldn’t you? Is it that big of an inconvenience to carry $10 bucks in your pocket?
It seems to me if you’re that upset about having to use cash, there’s gotta be something else that’s bothering you. Why take it out on the shops that work hard to provide service, selection and value. I promise you, most mom & pop shops aren’t laughing all the way to the bank…
I read the text of the bill, and it mentions ‘credit cards’ but, differentiates between credit and debit cards. I didn’t see anything that says they can set a minimum purchase amount for debit cards.
Please advise.
Ken
That’s my question, too. Can they impose a minimum purchase for a debit card purchase? I’ve been trying to find the answer to this for a while now.