Comments on: Can Merchants Require a Minimum Purchase for Credit Card Transactions?

By: Mike P

Mike P — Fri, 27 Jan 2012 05:46:14 +0000

Actually, there is no law. Merchants can set any minimum they choose. Yes, Visa and MasterCard can pull their terminals from a business, but there is no law in any state on paper or approved that does not allow merchants to set a minimum to use a credit card. Not in any state!

By: Ray

Ray — Thu, 03 Mar 2011 16:58:02 +0000

New law says yes. Fresh after posting on whether small credit card charges are shameful or otherwise to be avoided, I got a comment on that post. “Paul” asks:

“Wasn’t a provision of the financial reform bill that passed this July that store owners are now legally allowed to not accept a credit card charge for less than $10? I’m almost sure it was.”

I hadn’t gotten wind of this at all, but I dug around to try to verify Paul’s claim.

Sure enough, Paul got it. Payment card networks are no longer allowed to demand that merchants accept all payments, regardless of total amount. They can only demand that merchants accept all payments not less than $10.

The bill Paul was referring to is HR 4173: Dodd-Frank Wall Street Reform and Consumer Protection Act, and was put into law on July 21st, 2010. Section 1075 of this law (beginning on page 693 of this printing of the new law) amends the Electronic Fund Transfer Act of 1978. The part that restricts payment networks as to the minimum charge they can force merchants to accept (which, up until about a month ago, was $0.01) is detailed in Section 920(b)(3)(A)(i)(II) of the amended EFT Act. Beginning with the amended section 920(b)(3) (page 698 of the new law, for those of you who are following along):

(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 …

That is how the law is now. In the amended section 920(b)(3)(B), it further goes on to say that this amount may be increased under certain process. Meaning: There are avenues for making the allowed minimum greater, so down the road merchants could require $20, $30, or more before I can pull out my credit card.

By: ItsNotComplicated

ItsNotComplicated — Tue, 18 Jan 2011 08:13:34 +0000

PS to the above:

I live in Silicon Valley where no one carries cash. Yet everyone I know has a bunch of loose change, yep.

By: ItsNotComplicated

ItsNotComplicated — Tue, 18 Jan 2011 08:09:39 +0000

Why do people see this as a complicated issue? Step outside of the box.

You know that spare change we all have at home, in our office drawers, in the ashtrays, glove boxes, consoles, etc., in our cars? Start keeping it all in your car. When a business requires a minimum on charge cards when they formerly did not, grab a handful of change and pay ‘em. Don’t be ridiculous and try to pay only in pennies or you’ll be SOL. Just, ok then, here you go. They get paid without credit card fees, you can get what you want without having to go to an ATM, write a check (who even does that anymore?) or even zero frustration. Also saves you a visit to one of those coinstar things and being charged a fee by them.

In other words, make these purchases like we did when we were kids. With change.

By: id_unavailable

id_unavailable — Tue, 21 Dec 2010 14:47:59 +0000

How do companies that use high volume low prices operate? The IT industry deals with purchases that are several thousands of dollars with margins of 5%. Get hit with a 1.6% credit charge processing fee and now they are at 3.4% GP. Maybe it sounds small but consider a $100,000.00 deal. The company receives $3400.00 for the work they put into the sale and the credit card company receives $1600.00 for processing a transaction that costs them a $100.00 at the max. The credit card company made 1600% markup on that transaction. The business made 3.4%.

OK say the company had the best rates in the world and visa only charged them .25% (thats right 1/4 of a percent). The company still owes the credit card company $250.00. So the retailer walks away with $4750.00 and the credit card company gets $250.00. How much work did the credit cards company do to make $250.00. How many transactions like this one are made per day?

Simple math shows who is making money and who is not. If we accept the payments from credit cards we are at fault. If we unite and decide to make the rules they will fold to our requests. As cynics above stated just accept it and move on.

What happened to supply and demand? Tell a customer they have to pay an additional charge of $1600.00 to process their order without hiding the fees and you customer would be irate to say the least. So how do cc companies get away with it? Simple, It is never disclosed to the consumer.

By: Debbie

Debbie — Wed, 25 Aug 2010 16:28:51 +0000

Christy, I am aware of the difference between credit cards and debit cards. What you may not be aware of is that small business owners, such as myself, don’t offer debit card payments because the way the transaction fees work for debit cards is different from credit cards and it would actually cost more to allow a pin transaction. A debit card transaction is a flat fee (transaction fee) and no percentage. A credit card transaction is a flat fee plus a percentage. A debit card transaction fee is much higher than the flat fee for a credit card, can be more than double. So, in a case where there’s a small purchase (a bottle of water) using a debit card may actually cost the business owner 50 cents or more where a credit card transaction may be 12 cents plus 2% or something like that. So, debt card purchases don’t help a business unless the transactions are larger. Additionally, even though you use a debit card, unless you actually type in your pin number, it’s being transacted as a credit card. In other words, every time you go to a restaurant you are using a credit card, not a debit card. So, that law would apply to everywhere a pin number transaction isn’t used. In the case of my business that would be every transaction because I don’t have a machine that offers pin number transactions. The point I make again to all of those that aren’t business owners, there’s more than meets the eye. I’m not complaining, as I mentioned, it’s part of being a business owner. But, I still feel like you shouldn’t complain either until you know all the facts. Most of what is mentioned here is that business owners, such as myself, make enough money on the prices we charge and I say again, it is simply not the case. I haven’t had a paycheck in 3 years. I do it because it’s my passion. What I disregard are comments made by people who don’t know the facts. Your point above may be the facts to a specific article but it doesn’t tell the whole story. My point in including that link was because someone didn’t believe it was true. But, for those who care to read this forum, when you use a credit card (or debit card) for a purchase under $10.00 it really is a hardship on the business. The young kids, unfortunately, are going to be dealing with this hardship when they get out in the world to work. If you want a nation with a thriving economy, where businesses aren’t closing their doors every 3 seconds, then stop taking the attitude that small business owners are living high off the hog and you are entitled to make them pay. Help the business owners. Get into conversations with them. You’ll be amazed at what you don’t know.

By: Christy

Christy — Wed, 25 Aug 2010 14:36:21 +0000

Debbie-
As per the paragraph you referenced regarding the minimum purchase fees:
“The bill includes an amendment that would require the Federal Reserve to set regulations resulting in “reasonable and proportional” interchange fees for debit cards. The amendment also bars the card industry from interfering with merchants who offer a discount or other benefit to customers who pay by cash, check or debit card rather than credit cards, and would allow merchants to set minimum purchase amounts of up to $10 for credit cards.”

The minimum purchase amounts are for (pay close attention – key word here) CREDIT cards, and would not apply to debit cards.

By: Debbie

Debbie — Tue, 27 Jul 2010 16:49:03 +0000

July 21, 2010

You can read it here:
http://supermarketnews.com/Leg.....form_0721/

And here is the paragraph…

The bill includes an amendment that would require the Federal Reserve to set regulations resulting in “reasonable and proportional” interchange fees for debit cards. The amendment also bars the card industry from interfering with merchants who offer a discount or other benefit to customers who pay by cash, check or debit card rather than credit cards, and would allow merchants to set minimum purchase amounts of up to $10 for credit cards.

And, again, you just don’t get it. Small businesses don’t get all those write offs. It’s the large corporations that do. I am speaking for the small business owners. The ones who cannot afford to pay you to charge a small item. Until you own a business you cannot know what it takes to run a business. Say all you want it’s part of owning a business until you know the facts your comments are disregarded by me.

By: Annette

Annette — Tue, 27 Jul 2010 16:34:07 +0000

What is needed is a class action suit needs to be filed against all business owners who have broken the law. I don’t care what the expenses are, that is a part of being in business. Besides, business owners get enough write-offs from the gov’t already. How dare they rip off the consumers who keep them in business in the first place. I had someone write me and tell me that the law has changed. You would have thought that he would have posted where he got this info from. Nevertheless, those who are violating the law or who have in the past should be penalized for extortion and or blatant discrimination.

By: Debbie

Debbie — Tue, 27 Jul 2010 16:20:55 +0000

Just an FYI, a new law was just passed saying it is now legal to require a minimum purchase. The white house administration agreed to a minimum of $10.00, not $5.00.

As a business owner I would like to say that I am thankful for this. Visa/Mastercard has raised their rates 4 times in the past YEAR to business owners. To charge a bottle of water, or any item less than $5.00, is basically like me paying you to buy my product.

I know those of you who are not business owners think we’re sitting back living high off the hog but it’s simply not the case. We get nickel and dimed every time we turn around.

I’ve seen comments posted on here about how much profit some places make but you really don’t understand the math. If we make $4.00 off of a beer, how many beers do you think we need to sell in order to pay rent, which is easily in the many thousands. Not to mention our gas and electric bills. I have a very small shop and my electric bill alone is over $1,000 a month. Can you imagine what a large place has to pay? Now factor in the insurance we have to buy: business, worker’s comp, unemployment, etc. Don’t forget the fees we pay to our villages, states, health departments, etc. every year or every month of every quarter. Then factor in everything we have as a commercial business such as telephone and internet, etc. Because we are labeled “commercial” those charges are almost 4 times that of a household. I haven’t even gotten into payroll. Also, did you ever think about how much inventory a restaurant or a gas station has? Just think about it, add what you think it costs and see what that comes up to. It’s thousands upon thousands that we invest and sit on until the customer is ready to come in a buy.

I am not complaining. It’s what we know we have to do to be a business owner. What I am saying is you shouldn’t be complaining either. Because, frankly, you just don’t get it.