Can Merchants Require a Minimum Purchase for Credit Card Transactions?
March 12, 2008
The short answer is that no, merchants cannot require a minimum purchase before accepting your credit card as payment. In fact, all major card issuers explicitly forbid this practice, as follows.
From Visa’s merchant contract:
Dollar Minimums and Maximums - Always honor valid Visa cards, in your acceptance category, regardless of the dollar amount of the purchase. Imposing minimum or maximum purchase amounts is a violation.
From MasterCard’s merchant contract:
The merchant must honor all valid MasterCard cards without discrimination when properly presented for payment. The merchant must maintain a policy that does not discriminate amount customers seeking to make purchase with a MasterCard card. A merchant that does not deal with the public at large (for example, a private club) is considered to comply with this rule if it honors MasterCard cards of cardholders that have purchasing privileges with the merchant.
From Discover’s merchant contract:
You may not require that any Cardmember make a minimum dollar purchase in order to use a Card and, other than when we have not authorized a Cardmember’s transaction, you may not limit the maximum amount that a Cardmember may spend when using a Card.
So there you have it. The next time a cashier tells you that your purchase has to total a certain amount before they can accept your credit card, you’ll know that they’re blowing smoke. Of course, there’s little you can do if they hold their ground — and most will, as they’ve likely been instructed by their boss that they’re not allowed to accept credit cards for purchases under a certain amount. In such cases, your only real recourse is to contact the card issuer and report the problem.
Posted in Credit Card Facts
March 12th, 2008 at 3:39 pm
Of course the credit card companies forbid this — it cuts into their profits. Don’t the merchants have to pay a fee to the companies when they process a CC transaction? If the fee is, say, $0.50 and I just bought a $1 bagel, then the merchant loses 50% of every bagel sale to the CC company. I don’t know what the actual fees are, but I only ever see this restriction at small local businesses (like coffeeshops). I would never report them.
March 15th, 2008 at 11:25 am
Businesses know what they are getting into when they sign up with merchant banks to accept credit cards, so I don’t feel bad for them at all. The fee is very likely more than offset by the additional business that they do because they accept credit cards. This is what businesses have to weigh when trying to decide whether to accept credit cards or not.
March 18th, 2008 at 8:38 am
At the retail places I’ve worked, the credit card fees were percentages of the sale - and the longer you wait to “settle” the days balances with them, the higher the percentage. I think the restaurant I worked at paid an average of 3% across it’s 30 locations - it varied by store according to when they settled their daily balances.
The two gas stations closest to my house have minimum purchase requirments inside (not at the pump). One is $3 and one is $5. I was very annoyed the day I ran in to grab a drink while I was running errands and they told me I had to add to my purchase. I didn’t, and I got the soda at my next stop.
March 18th, 2008 at 8:52 am
The fees that merchants pay are nicely disclosed; but it depends on the type of transaction, merchant, and type of credit card used. You can check these “merchant interchange fees rate” at both Visa’s and Mastercard’s websites for the most updated fee tables. In general, it’s between 1-2% the purchase price, sometimes with an extra dime or quarter or two per transaction. American Express does not disclose their rates but have been known to be higher than visa or mastercard.
March 18th, 2008 at 9:08 am
Credit card fees are a percentage of the transaction plus a monthly service charge.
Where I work, we used to have a $5 minimum, but when management changed, that went away. My bosses reason for getting rid of it was “A percent is a percent.” Right now, the register I work sees over 100 transactions between 11 AM and 6:30 PM weekdays. This is up from previous years (along with overall business). We are a fast-paced college cafe & market location, often times with almost no room for customers to move during the peak meal times.
I personally believe card companies specifying no limits is not their call, except within the context of “You can’t to save money.” We may eventually have to reimplement a minimum purchase in order to provide the level of customer service our customers have come to expect. This implementation would not be to save money, but to provide superior customer service.
March 18th, 2008 at 1:30 pm
THANK you. I always tell people this but they never believe me. From now on, I’m sending them this link.
March 18th, 2008 at 2:46 pm
Visa and mastercard charge 1.5% whereas Discover and American express charge 3%, PLUS they’ll charge you a transaction fee of a few more cents. My friend is a gas station owner and when you look at the books it adds up. You can watch him cringe when someone busts out a credit card to buy a $1 soda or bag of chips. Some vendors actually charge an additional fee when people use a credit card, which makes sence to me. A local Jimmi Johns sub chain will charge you 50 cents.
With the accessability of ATMs everywhere you shouldn’t need to use a credit card to make a $1-8 purchase and if you don’t have the cash for it in an account you propably shouldn’t be buying it.
March 19th, 2008 at 8:45 am
Zach you’re right! And if they use a Visa Signature or Premium Credit card, the merchant pays alot. Nathan, you’re also right. I forgot about the monthly fees; however, those monthly fees go to the merchant processor company (usually the bank or third party where merchant account is setup.) On a related note, a few states also say it’s illegal to require customers to have a minimum purchase amount to use a credit card (but i forgot which states). In addition, the lowest fee-card is the debit card (when used as a pin– not signature based.)
March 24th, 2008 at 7:22 pm
As stated in the article, all the credit card issuers forbid a minimum purchase amount. However, there are quite a few merchants who enforce the store policy of a minimum purchase.
This, of course, brings up the interesting conundrum: If you report the merchant to the Card Association (VISA, for example), VISA will tell you to refer to the issuing bank (like Washington Mutual or Bank of America) — the issuing bank doesn’t have the resources to do anything about it, and VISA, Mastercard, AmEx, and Discover really don’t care.
The only real recourse is to take your business elsewhere. If you want to have some fun, though, tell the merchant that he’s breaching his contract with the Card Association and that you’re reporting him, and further that within 72 hours, he’ll be contacted by a Card Association staff member.
Hehehe.