Can Merchants Require a Minimum Purchase for Credit Card Transactions?
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.
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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.
Comment by Anca — Mar 12th 2008 @ 3:39 pmBusinesses 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.
Comment by MITBeta @ Don't Feed The Alligators — Mar 15th 2008 @ 11:25 amAt 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.
Comment by Deborah — Mar 18th 2008 @ 8:38 amThe 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.
Comment by Merchants — Mar 18th 2008 @ 8:52 amCredit 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.
Comment by Nathan — Mar 18th 2008 @ 9:08 amTHANK you. I always tell people this but they never believe me. From now on, I’m sending them this link.
Comment by Kyle — Mar 18th 2008 @ 1:30 pmVisa 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.
Comment by Zach — Mar 18th 2008 @ 2:46 pmZach 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.)
Comment by Merchants — Mar 19th 2008 @ 8:45 amAs 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.
Comment by billspaced — Mar 24th 2008 @ 7:22 pmI find it disturbing; in a time when we can send probes all over space, chat with people on the other side of the globe, and build walking robots, that we still use this archaic thing known as CASH! I hate the stuff. It’s bulky, smelly, dirty, and counterfeiting is a much larger problem for the government than identity theft is. For those small businesses that still prefer cash over credit…TOO BAD! GET WITH THE TIMES!! I think it’s adorable that you put your little “$10 minimum” signs up to stick it to the big bad credit companies, but we both know that you are going to eventually lose the fight. It’s economic evolution baby. Eventually everything will be wire transferred, and unless you small businesses accept it and adapt, you will become extinct like the dodo bird. How do you like me now?
Comment by David — Jun 12th 2008 @ 12:19 pmthe business accepts the credit companys agreement in the initial setting up of the ability to take cards and they breach that agreement when setting minimal charges stop sympathizing for someone who knew the rules prior and broke them, whether it sucks for the business or not is not the the issue, sure it can be a little harsh but busines is business and money is money, and they know the rules.
Comment by alex — Jun 27th 2008 @ 12:27 amWell David, you obviously know nothing about running and MAINTAINING a business. If it weren’t for all the little “mom and pop” stores around, you would see the prices you are paying for “convenience” rise. Small businesses keep afloat by competing in the market with larger corporations so that you, the consumer, can get a fair price. Locally owned businesses are providing a service to the community while trying to make a living. You know nothing about ALL the other fees and loss of profit that these small businesses incur. For instance, paying by credit card at the gas pumps. There is no minimum that you can purchase. If the profit for a gallon of gas is a nickel and the fees (per transaction or by percent of the actual amount charged) are higher than that of a nickel, then where is the profit? How about it becomes a loss. I wonder how many of those per day they have? So small businesses have to make up for their loss somewhere and set some sort of standards. Ever thought about how much the credit card companies and the merchant processors are profiting off every cent you spend, not as easily said with small businesses. Businesses accept Credit cards as a courtesy to the consumer, to make the consumer’s life a little easier than having to stop at the bank and get cash every time they needed to buy something. If you complain about the little things in life, you’ll never get to the battles that actually have meaning.
Comment by faith — Sep 4th 2008 @ 2:56 pmNathan:
You said “We may eventually have to reimplement a minimum purchase in order to provide the level of customer service our customers have come to expect.”
Just don’t. The merchant agreement that you signed with the credit card company *explicitly prohibits* this, and anyway it’s poor customer service, so it defeats your purpose. If you can’t afford to accept credit cards, then by all means don’t — I think more merchants should realize that that’s a viable option.
Everyone else:
Comment by Marnen Laibow-Koser — Sep 19th 2008 @ 10:41 amI have created a website to identify merchants that impose minimum purchase requirements in violation of their agreements. It’s available at http://minimumpurchase.livejournal.com — check it out!
It is interesting that the experiences that I have had were all with businesses and gas stations operated and/or owned by foreigners. I am not xenophobic, but it is most disheartening that so many people come to this once great nation and disrespect our laws. I did call VISA to report a local gas station that imposes a minimum $5.00 charge for purchases. The number is: 1-800-847-2911. They should not provide the option of using credit cards if they want to impose their own illegal rules. My advice to all who read this website is to report each and every merchant who imposes these minimum charges and follow up with VISA to see that they are fined.
Comment by Matthew Pasalic — Oct 13th 2008 @ 8:24 pmIn Regards to Faith’s comment on Sept 4th 2008 @ 2:56 pm:
I work in a small business in Totowa, NJ. The fee really isn’t that much. We do not charge a minimum. Even if someone wants to charge 5 cents to their card. The rules are the rules. Everyone has to follow them, or have their card machines and privileges taken away.
Comment by Steve — Oct 29th 2008 @ 12:19 amI am a small business owner. I own a bar and it costs a lot more than just fees to accept a credit card on small purchases such as one drink. It costs me in sales/customer service and supplies. First as far as supplies I have to pay for the rolls of paper and ink to print the charge slips (and if you think computer ink cartridges are expensive….). Also maintenance on the machine. Plus the phone line (which is also the main bar line). As far as sales and customer service, I am loosing money having a bartender tied up (plus the phone line)running a charge for one drink. It takes time away that she could be making and serving drinks. I know you’re probably thinking that you are a customer and if that was the only circumstance I would take cards for any amount but that is not how it works in this business. I get customers who want to pay by charge everytime they order a drink. When we have happy hour our drinks are $2.00 and under…therefore I have to pay a transaction fee and a % of the sale on each drink they order….along with the time consumption of my employee and the supplies etc. I come out in the RED. Other types of expenses to a small business owner like myself are ….. As a courteousy we let customers run tabs. We ask to hold a dr license or credit card for our protection. We have been burned so many times on walk-outs (they leave without paying their tabs). We check the cards expiration dates to be sure they are valid but we lose out when they are stolen or declined. The initial transaction goes through and they deposit part of the sale amount minus the many fees (transaction, % of the sale, plus more of a % on speciality cards ie. rewards, mileage etc.) into our account. Unless we can send in a valid charge receipt w/signature, If the card was stolen we get a charge-back where they deduct from our account the full amount of the sale plus another fee (so now we are out the sale amount plus all the fees), . Of course, there are no signatures if someone walks out since the card was stolen . If someone walks out on a card that ends up being declined, I lose the amount of the sale and still have to pay transaction fees even if the card is denied. Even if the person is still there and the card is declined and they say it’s impossible run it again; every time we run that same card we are charged another seperate additional transaction fee.This can cost (and has in my type of business) a lot of money, not only in fees but loss on sales to pay for my overhead (rent, salaries, electricity, water, etc) and the inventory (liquor, mixers, straws, etc.) plus I need money to get new inventory to be able to try to make money to cover my losses and fees. How am I supposed to survive? What is so bad about having a minimum charge or a service fee for under a certain amount when someone is using a charge card it helps me the small business owner. Would you rather we raise our prices?? Then everyone would be paying more just so people could charge a small amount on their cards. How fair is that?? I now have to pay a $5.00 delivery gas charge when I order my liquor or other supplies is that fair to me…but I didn’t change my prices, I eat that charge myself. Accepting charge cards is a courteousy that we pay for for our customer’s convenience; therefore why shouldn’t we be allowed to set a minimum on charges; instead of it costing us more money. We all know the major credit card companies make their money on the fees from businesses that accept them and from the consumer (which I also am) that uses their cards in fees and interest. So please stop going after the small business owners who are struggling to make a living and survive against these major companies that are gouging us which ever way we turn. Go after them not the small mom and pop businesses.
Comment by business owner — Nov 13th 2008 @ 9:26 pm“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.”
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Nonsense. You either accept credit cards or you will go out of business. It’s almost 2009 ya know. Thta’s just how it is – no ifs ands or buts. There is not a single business entity out there that ever has lasted more than a year while refusing to accept credit cards. It’s just a fact – that is also why the fees charged by the issuers to businesses are so high – because they have all bussiness operators by the sack – and everyone (’cept for a few mis-informed dreamers) know this.Period.
Comment by Buubs — Nov 26th 2008 @ 5:32 amNO! NO! NO! Report It to you credit card company. I only have the link for Master Card. http://www.mastercard.com/us/p.....tions.html
Comment by Justin — Dec 2nd 2008 @ 3:54 pm1800-300-3069. the real problem is that most credit card company and bank employess don’t know that it is an illegal practace so you have to dig deep when on the phone with them. Tell them that it is Usually under Miscellaneous and called a minimum maximum transaction. I called every credit card company that i have and only one of the 5 knew anything about it and that was HSBC Mastercard.
A small business owner can’t charge a fee to a customer for a small sale paid by the credit card. But… there is a loophole! Nobody could stop that business owner if he/she’ll put a sign by the register saying “Our prices below $10 include $0.50 cash payment discount.” Nothing wrong: cash discount is not a fee!
Comment by Igor — Dec 11th 2008 @ 3:24 pmIn this case if customer wants to charge $1 for the bagel, he/she should pay $1.50. If customer don’t bother to carry some cash in the pocket it should not punish a small business owner. Sorry, life is a two way road.
I have no sympathy for these business owners belly aching about the fees associated with credit cards. Just like paying the electric bill, or the water bill, business owners elect to use these credit instruments to increase business, but they are not happy that some transactions cost more proportionally than others. Tough.
They want their cake and eat it too. Either accept the damn cards or not, there are no half-ways. I NEVER give my business to companies that play this game.
Comment by ronjamin — Mar 18th 2009 @ 1:43 pmIs this different for other countries? I recently moved to Australia, and this practice (along with surcharges for credit card purchases) is rampant.
Comment by Laurie — Apr 7th 2009 @ 5:40 amSmallbusiness owener -
So you own a bar? What is your MARKUP on the liquor/drinks you charge for? I dont feel so bad for you when you make a nice profit when you charge between
$3-$5 A DRINK. 42 shots in a half gallon… 42x$4 = $168 for a $20-$30 bottle…not a bad profit!!! so i dont see why you are chatrging a minuum @ 3% at the MAX!
nice try in justifing your min. purchase though
Comment by JC — Apr 12th 2009 @ 5:01 amI just purchased bananas in a local supermarket – total was $1.15. Cashier asked the young man bagging groceries if I was could a credit card for a $1.15 purchase – he said I could not use my credit card – he went on to say its been that way for the last 10 years – (the store has been there for only about 3 years). I asked to speak with the “Manager” and the cashier told me he was the Mgr. (I never saw him before – I often shop in this story). Such nonsense – I paid cash but will follow up with Sr Mgmt of the chain.
Comment by MW — May 3rd 2009 @ 5:01 pmI tried to use my DEBIT card (which has a VISA logo on it) at a store while on vacation. I was told that I have to spend $10 in order to use m DEBIT card. If I hadn’t been purchasing a gift for someone I would have walked out and let her keep her $7 kitchen towel. Thank goodness I had cash on me!
Comment by Steph — Jul 3rd 2009 @ 5:35 pmWe have a quite a few local businesses that practice this cover charge for credit/debit card holders. It’s like some kind of currency racism/segragation. I will check the laws for my state. I’m glad I looked this up. Was tired of buying more than I needed. I hardly ever carry cash because cash can’t get replaced if robbed. Anyway, good luck consumers.
Comment by RW — Jul 30th 2009 @ 6:35 pmWell I work for a small business and they have a minimum card purchase which is $5 they have been in business for 15yrs and there has only been one crazy lady that went off about not being able to pay $2.50, she rudely yelled at me & went a little crazy so here I told her “We refuse the right…” There are ways to talk to people and she obviously didn’t know a polite way. If you do NOT like how they run there business I’m sure she can consume else where. I don’t complain when gas is more expensive if paid with a credit card and if I don’t want to waste $10 on a minimum charge then some businesses also have ATM machines, are people also going to complain because the machine charges $2 to withdraw money? To me its simple you don’t like it don’t go back!
Comment by EG — Oct 30th 2009 @ 12:18 pmFor those who have small businesses and understand I’m glad we can help one another.
Good Luck!
Really nice information thank you for sharing it and good continuation!
Comment by interest rates calculator — Jan 14th 2010 @ 6:29 pmWell, EG, I suppose honoring a legal contract is just one of the things you small business owners feel you’re above.
Comment by Kyle — Feb 1st 2010 @ 2:17 amThe big banks that issue credit cards employ heavy-handed strongarm tactics when dealing with merchants. Merchants have no realistic choice but to accept credit cards, so big banks take advantage of this. That the general populace (at least those that are responding here) is supporting big banks over small merchants is mind-boggling. That anybody thinks it is okay for the big banks to dictate sales terms to the merchant is mind-boggling.
If we were talking about a straight percentage taken out per sale, things would be much more straightforward. 2% of a $1 sale is no big deal. Is 37% reasonable? Of course not, but merchants pay a minimum transaction fee plus the 2%, so small purchases now lose the merchant money. In businesses that have only small purchases, this is HUGE.
It is not reasonable for GOVERNMENT to legislate how a business charges for their goods, except in a monopoly situation (power companies, cable companies, phone companies). So the few states that have laws forbidding surcharges for small credit purchases are out of line.
We all decry the big banks’ terrible treatment of their “customers” when they charge outrageous fees for petty transgressions, or when they damn near bankrupt the country with their financial derivative investments and sub-prime loans, then take taxpayer monies to bail themselves out, all the while paying out bonuses to the very people that put them into what should have been bankruptcy, but we think it is okay for the big banks to dictate business practices to small merchants…
Mind boggling.
The big banks are the bad guys, folks. They profit from predatory practices, and their monopoly of the credit card industry gives them unwarranted power over the economy and small merchants.
Carry around a $20 bill and be nice to the small merchant… we are just like you.
Comment by BigBanksAreEvil — Feb 1st 2010 @ 3:11 amI’m a small business owner. If the sale is less than $5 I charge $1.00. Don’t like it? Go somewhere else, I refuse to be driven out of business because of unreasonable fees.
So far, I haven’t seen anyone complain about spending $2 to $5 to take their own money out of an ATM.
Comment by Stan — Feb 3rd 2010 @ 9:02 pm“Well, EG, I suppose honoring a legal contract is just one of the things you small business owners feel you’re above.
Comment by Kyle — Feb 1st 2010 @ 2:17 am ”
No kidding, huh? It’s amazing to hear these small business owners getting self-righteous and playing victim when they’re the ones breaching their contracts. No one forced them to accept credit cards. It’s their choice. So why do they take them? Because they know it’s in their best interest to. They get more business that way. But as someone else mentioned earlier, they want their cake, and eat it, too.
As for “Faith” above claiming that if it weren’t for mom and pop stores, you’d see the price of convenience rise, what the heck are you talking about? Convenience stores always have higher prices than their bigger competitors. That’s why I limit what I buy at convenience stores. It’s part of capitalism. I can easily take my business elsewhere, to a convenience store that plays by the rules, or to a grocery store where the prices are lower. It’s as simple as that.
That said, even after I found out it’s against their agreement, I always used to let it go whenever I see a minimum purchase requirement, b/c I do sympathize with smaller businesses, until one day, the lady behind the counter was rude to me. Then I pointed out the min. purchase requirement, and how there isn’t supposed to be one. Her expression said it all. She was speechless. She knew exactly what I was talking about. That’s when I put down what I was about to buy, and never went there again. I just finished reporting that store, along with another business that has a $20 min. purchase requirement, where they charge $6 for a Bud Light! I did not feel bad at all for reporting them.
Comment by Michelle — Feb 25th 2010 @ 10:19 pmNot enough people even though this is against the terms of the merchants’ contract with the credit card issuers. In fact, I called one of my issuing banks, and the employee on the phone had no clue what I was talking about. She then asked her supervisor, who also thought it was within the merchants’ rights. In fact, most people don’t know, which is why it’s so common. It doesn’t get reported. The person I spoke with said it happens to her all the time, and if they weren’t allowed to do it, surely they wouldn’t, right? She then proceeded to “explain” to me that it is within their right not to accept credit cards at all (which is true), just like it’s within their right to set a min. purchase requirement. I then had to explain that while it is within their right not to accept credit cards period, IF in fact they do accept credit cards, then they can’t have a min. purchase requirement, per their contractual agreement. I could see I was getting nowhere with her (but she was very nice about it), so I told her to do a search on the internet when she gets home. She was so sure there was no rule against this practice because she sees it all the time. Do you see the irony? The fact that this type of breach of contract by merchants is so rampant helps to perpetuate it.
The only way this will change is if enough people know the rules and take the time to report it! When I called one of the bigger banks (Chase), and Visa directly, those employees knew immediately what I was talking about. NY’s Better Business Bureau has good information, including contact info:
http://www.newyork.bbb.org/Sit.....b99b3e5d56
Comment by Michelle — Feb 25th 2010 @ 10:39 pm