For years, educated credit card holders have been safe in the knowledge that a merchant could not require them to purchase a minimum amount in order to charge something to their cards. But with the recent passing of the finance bill, the door has been opened to allow such minimums — and the card companies are just fine with that.
Visa is leading the way in this brave new world of minimum charges. Consumerist reader Pete recently noticed that on the card company’s site, it now reads, “U.S. retailers may require a minimum purchase amount on credit card transactions. The minimum purchase amount must not exceed $10 and does not apply to transactions made with a debit card.”
To see if the other card companies were following suit, we checked out the info available on their sites.
In the American Express Merchant Manual [PDF], Section 3.2 says Merchant may not: “impose any restrictions, conditions, disadvantages or fees when the Card is accepted that are not imposed equally on all Other Payment Products, except for ACH funds transfer, cash, and checks.”
To us, this implies that — so long as the merchant requires the same minimums on all the other cards it accepts, AMEX is okay with it too.
We checked with a rep for AMEX who confirmed:
American Express’ policy has been to require parity with other payment products (this is the “equally imposed” section you referenced). In other words, if a merchant chooses to require a minimum for credit card transactions – it must be the same for all credit card products. As you’re probably aware, the Dodd-Frank Act allows for merchants to set $10.00 minimums for credit card transactions but does not allow merchants to differentiate by issuers or payment card networks (i.e. a minimum for a card issued by Bank X on Network Y but not cards issued by Bank A on Network B).
And then we looked at the MasterCard site and had a glimmer of hope when we stumbled upon Rule 5.11.3 in its Merchant Guide [PDF]. It reads:
“A Merchant must not require, or indicate that it requires, a minimum or maximum Transaction amount to accept a valid and properly presented Card.”
Alas, our hopes were dashed when we reached MasterCard for comment on the Visa rule change and received the following reply:
“MasterCard will be modifying its rule similarly in the near future.”
We tried to locate rules for the Discover card and were fruitless in our search. Additionally, no one at Discover has responded to our request for comment.
What do you think of the credit card companies allowing merchants to require minimum charges? Do you expect to see more merchants posting notices of $10 minimums?
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I think this is actually a good thing. The credit card system where minimum charges aren’t allowed passes enormous costs on to the retailer, who passes it on to us in the form of higher prices. The government allowing retailers to charge minimum prices should result in lower prices.
But it won’t. They won’t lower their prices one bit. I was talking to a 7-11 owner about this during their “petition drive”. They’ll make more profits. If the credit card company starts making less money they’ll pass that on to you as well. The only person this doesn’t benefit is us.
I usually use my credit card when I go out (occasionally) for lunch. Sometimes this means using my card for a $3 purchase. The places I’ve been to don’t have limits for credit card orders, although they charge 50 cents for debit cards. That’s one thing I don’t understand – don’t banks charge merchants for their credit card transactions, and not for the debit card ones?
Anyway, I prefer using my credit card over cash. I don’t have much cash (ever, since I don’t use it) and I hate carrying change. Although I did once pay a dollar with bunch of coins including like 20 pennies. I understand that the merchants are charged 3% (for Visa and Mastercard, that is) but it’s a convenience issue. Either that or I could not patronize your store (which maybe you don’t care about, since I’m not spending boatloads of money there anyway). We can load cash onto our work ID cards and use them as debit cards either on campus or at some merchants in the neighborhood. That’s pretty convenient too and I thought maybe that was a better alternative than using my credit card (with the 3% transaction fee that the merchants have to pay) – but I read the vendor terms & conditions and it seems that merchants have to pay a 4% transaction fee! Why would any of them want to accept our ID cards then?!
Thanks Obama! Your financial reforms have raised the interest rates on all my credit cards, required me to make monthly minimum payments on no interest promotional plans, and now lets merchants have minimum transaction amounts for credit cards!
And the benefits I gained were . . . well, I always pay my bills on time, so late fees and that sort of stuff doesn’t apply to me. . . guess I can’t think of any benefit.
Thanks Obama!
I suspect that MOST merchants won’t understand that the minimum DOESN’T APPLY TO DEBIT CARDS, and refuse to accept any debit card transaction for less than $10.00. Talk about a confusing requirement.
Actually if I remember correct a few years back I received a notice & read in the news that Merchants can’t be required the accept a Debit card at all. I could be wrong on this though but it was a big deal.
Also Debit cards also cost fees but can be less if done with a pin although not all merchants can run debits with a pin. This is why Retail Stores make it harder to use your debit card as a credit card because it cost less to run debit with pin.
wait, merchants aren’t allowed to require minimums?
thats funny. my local pub The Griffin, requires a $20 minimum for each transaction.
Merchants can & always have been aloud to charge a Min just not aloud to single out Credit Cards for a Min. Now we can though. Also get Ready for more changes Merchants have come together & demanded change for the Out of Control Fees imposed by the Major 4 Credit card Monopoly.
I just received notice recently the the Unqualified Fee is once again being raised which coincidentally most of our transaction are Unqualified at the Highest rate. We are in a much better position since we do have a $225.00 Min charge for any transaction but the fees go up & we pass them on to the consumer somehow because that is how it works. I keep cards in our business as a convenience for some clients but most pay by check.
Until you have been a Merchant with all the very biased rules none of you really know what the cost of your cards are. As for merchants having a choice this just isn’t true because consumers pushed for cards & the Big 4 pushed merchants with all the fees to cover rewards etc.
Those of you that don’t like change may not be buying anything before it is over. A long over due change is coming to Merchant Processing.
they should just lower the fees on transactions under 10 bucks.
Why have a minimum? Why not charge me the 3% or whatever the cost is for purchases under $10? It would be cheaper that whatever crazy ATM fee I would have to pay to take out cash and the vendors could recover their costs.
Pretty sure the merchant agreement prohibits charging to recoup credit card processing fees.
For that matter, I’m actually curious about the permissability of “cash discounts.”
So what about the small donut shops and convenience stores who currently accept cards but don’t have a pin pad device? I notice that this doesn’t apply when using a debit card…
What would be better is that banks and credit card companies greatly reduce the fees they charge for transactions under $10. This way the merchant can afford to accept credit cards on small purchases, and not have to require minimum purchase amounts or charge fees for credit cards.
Nice to know you really don’t care for my business. Doesn’t hurt me any since there are usually half a dozen other businesses in the area that might like to see me every day.
It’s fine with me. I can use my debit card or cash if I want to engage in a smaller transaction. Besides, $10 is chump change these days.
From a merchant’s perspective, I think minimums only matter if you’re charged a per-transaction fee by the processor.
Our processor is purely percentages. I’d prefer not to deal with cash if I can avoid it.
I own a small retail shop and if someone charges something under 10 bucks, my profit margin goes down to 5%. So yeah, I have a sign. I’m terribly sorry if you think you’re above carrying around filthy money.