There's a lot of information below, so here is an executive summary:

• Regardless of who the merchant uses to process credit card transactions, merchants that add a surcharge or require a minimum purchase to accept a Visa or MasterCard credit or debit card are violating their merchant agreement, and you should report them to the bank that issued your card.
• American Express does not forbid minimum purchase requirements, but they require parity with the other credit cards, so a minimum purchase requirement just for American Express, but not for Visa, is not allowed. American Express does not allow surcharges, unless they are assessed as a convenience fee...
• Convenience fees are allowable surcharges for specific types of payments, generally to schools and government entities (like taxes or fines).
• Asking for ID is not prohibited, but refusal to show ID cannot, by itself, be a reason for the merchant to halt the transaction.

Does this only apply to credit cards? What about when I use my [Visa, MasterCard, American Express]-branded debit card?

We've mentioned this before, but it's worth repeating: the merchant agreement applies to a consumer who uses a debit card with a major credit card company's logo on it, regardless of whether he signs it or uses a PIN. Note that this is for things like minimum purchases, surcharges, and requests for ID; a credit card often offers additional consumer protections for chargebacks, warranty extensions, and buyers assurance plans.

What's the deal with third-party processors?

After we posted about a McDonald's adding 25¢ to credit/debit card purchases, commenter Corporate Shill wrote in to tell us that many small businesses, like bars, use a third-party credit card processor to offset the expenses of purchasing credit card terminals and accepting different cards:

3rd Party CC Processing Companies offer Merchant Bank services to small businesses that cannot afford to offer CC services to their customers, or to businesses that have been denied CC processing by Merchant Bank.

(In simple legal terms the 3rd Party Companies will act as a straw man between the Merchant Bank and the business that actually accepts the CC from the customer.)

In addition to offering Merchant Bank services the 3rd Party CC Processing Company will often provide the data terminals and supporting equipment at a very low cost or even free to their clients. The data terminals, because they are accessing the 3rd Party network rather than an actual Merchant Bank network, can be programmed to accept an even wider variety of CC's and perform other functions, such as check clearing.

We asked the credit card companies whether a merchant that contracts with a third-party processor still has to adhere to the merchant agreement: MasterCard simply said "Yes," and American Express said that these merchants still sign a contract with the credit card company regardless of how they sign up for card acceptance. Corporate Shill disputes this, saying that using a third-party processor does not require the merchant to sign an agreement with the credit card companies, but the companies, at least American Express, disagree.

Are government and educational entities exempt from these rules? What is the exception for convenience fees?

MasterCard says:

We allow a "convenience" to be charged by certain educational institutions and public sector merchants, including:

• Elementary and secondary schools for tuition and related fees, and school-maintained room and board
• Colleges, universities, professional schools, and junior colleges for tuition and related fees, and school-maintained room and board
• Local, state, and federal courts of law that administer and process court fees, alimony, and child support payments
• Government entities that administer and process local, state, and federal fines
• Local, state, and federal entities that engage in financial administration and taxation
• Government Services; merchants that provide general support services for the government

In addition, a merchant is permitted to charge a fee (such as a bona fide commission, postage, expedited service or convenience fees, and the like) if the fee is imposed on all like transactions regardless of the form of payment used. For example, a merchant that has a website that accepts MasterCard, Visa and direct debit to a checking account as its three forms of payment, may ask for a surcharge IF the fee is applied to all three methods of payment. The same applies to a merchant that has a physical store that accepts cash, checks, MasterCard and Visa. The store can charge a fee as long as the fee is applied to all four methods of payment.

American Express says such fees are only allowed "in very limited industries, for example, taxes."

Can a merchant ask for ID with I pay with a credit card? Can I refuse to show it?

We've addressed this before, too, and it also bears repeating, along with a little elaboration from MasterCard: "However, to be clear, the MasterCard rule does allow merchants to ask for ID. Our rule prohibits the merchant from refusing to perform the transaction solely on the basis of the cardholder refusing to provide the ID. (If the merchant asks for ID and the cardholder refuses, then the merchant can either perform the transaction or call their acquirer for direction.)"

That being said, this isn't going to help you when you're out of cash and the guy at the convenience store won't let you charge that can of Drank. But reporting these violations, to the credit card company, to your issuing bank, and to us (preferably with pictures), will draw enough attention to the merchant that it will, hopefully, change its way.

This last evening I was hungry and decided that I wanted Jack In the Box. So I went to the Manhattan Beach, CA store on Sepulveda Ave. When I pulled up and was beginning to determine what I wanted for dinner I noticed a sign on the order board. It stated that in order to use a credit card it required a 30 dollar purchase, ID and a signature. While I have seen minimum payment requirements before at various liquor stores and restaurants I have never seen one so high especially for a drive thru window...

I did ask if they accepted debit cards which I was told no. Since I did not have any cash I left and went to another fast food drive-thru that did accept my debit card without a minimum purchase or other requirements. I have read many posts on your website regarding this and the many responses from your readers. I did not make a fuss or a scene, I simply drove past their window without making an order as I did not feel that store wanted my business. I did send a complaint to the corporate office of Jack In the Box as well regarding the violation of the merchant agreements. While reporting them to VISA may do nothing I felt that your readers should know that some franchisees are getting a but silly with their credit card use requirements.

As a follow up, I reported to the corporate office, VISA, and my bank. I heard nothing from Jack in the Box, VISA gave me their rules on what is not allowed, and Wells Fargo stated that merchants can set minimum purchase prices. I replied back to my bank with the answer I received from VISA. I have not yet heard back from my bank since that initial response. ... I just got off the phone with Jack in the Box corporate customer care. The guy on the phone was nice enough, however he was not aware of the VISA merchant agreements either. He did state that the particular restaurant has had some cc fraud issues recently. But this shouldn't cause users to be imposed with 30 dollar minimum purchases. He asked if I was able to be able to make a purchase using alternative means, so I stated that I did not have cash and did not return. He did offer to send out a coupon for some free Jack In the Box good at any of their restaurants.

The relevant section reads:

Always honor valid Visa cards in your acceptance category, regardless of the dollar amount of the purchase. Imposing minimum or maximum purchase amounts in order to accept a Visa card transaction is a violation of the Visa rules.

By requiring a minimum purchase amount, the US Postal service is in violation of its credit card merchant agreements. This is from page 14 of VISA's:

Reader Mike was miffed when he saw this. Why should he have to buy extra stamps? His letter is inside.

You would think that the United State Postal Service would behave better than an ice cream shop. — BEN POPKEN

Mike writes:

Likewise, a day without an email from Steve of Amy's Ice Cream is like a day without getting hit in the head with a brick. At least, that's the twist this Rocky Road may turn if his latest missives and our retorts are any indication.

All the gore you crave, after the jump...

After we posted Steve's email addres, as he said that he invited anyone with feedback to email him, Amy's Ice Cream received several supportive letters from readers of The Consumerist. Steve forwarded these emails to us.

We replied, "See, not all our readers have horns."

He then sent an email,

"Just a few of the emails I have received since you put my email address up. I am still waiting to pass judgement on your BLOG, all that BS about; "brine" and "made from left-over toffee ice cream". I really think you should wait to pass judgement on people and their businesses until after you have visited them and seen them for yourself. 95% of the emails we receive are from customers that have had a wonderful experience. We are a good company that cares about our customers and our employees. Even "Mike" who sent in the original sign and all, I think has been recovered.
Anyway, just a few thoughts...
Come see us anytime,
Amy and Steve

We replied, "Not all jokes are as sweet as a scoop of vanilla."

He shot back:

Jokes and personal attacks are two different things. I am happy I chose the high road on this one...

We retorted:

"We never passed judgment on Amy's Ice Cream, nor are we responsible for the actions of our readers.

Mike's letter and original complaint provided a window onto a bigger issue, that consumers don't like minimum credit card charges and isn't it odd that these charges are explicitly prohibited in every single credit card's merchant agreement?

The brine you mention, we were referring to the mean letter sent to you, the letter was briney, not your ice cream.

The left-over toffee, that's the award we're talking about. Again, not your ice cream. Look at the picture, you have to admit that hunk looks odd.

We never personally attacked you or Amy.

If you consider it a "high road" to describe our blog as "bullshit," raise your sights."

Both the brine and toffee were mentioned in this post.

Steve riposted:

That's not true Ben, you made all sorts of judgements through, "jokes" "attached file Steve sent" etc.... Just curious, how many hits you get a month? Don't get mad Ben, can't we all just get along?

Peace,
Amy and Steve

We suppose that might count as a sort of elliptical judgement. Last month we got 330,000 hits.

Sure we can get along.

We'd be happy to swing by the ice cream parlor some day. Before we do, however, you may want to clear up some of your health code violations.

After all, how sanitary can the conditions be if the owners constantly have their foot in their mouth?

Previously: Amy's Ice Cream thread

The epic brouhaha even warranted a mention in Amy's Ice Cream news section. For instance, did you know that, "If you buy a small ice cream with one crushin' and charge it, the fees can be as much as 15%?"

"I would like to respond to the "craziness" that is flying around," Steve writes The Consumerist. "First, I have attached the sign that greets consumers now in our stores. It is the original sign that was replaced by the one that was posted on your website. One of our managers replaced his sign with the brief and too the point sign that is not our belief. We are a small mom and pop, Amy and Steve, we are 21 years old and we are not a big company, although we have 13 stores, we do the sales volume of one Chili's restaurant in 13 locations. If we had to do it over again, we would never have taken credit cards. Most of our transactions are small and the fees are ridiculous, as much as 10-15%. Don't blame us, blame Visa and Mastercard. I apologize for this misunderstanding and encourage our customers if they are really mad to send me an email steve@amysicecreams.com."

The file Steve sent us over was titled, "NEW$10Minimum.pub"

Previously: Amy's Ice Cream thread

Steve, Amy's partner in the ice cream shoppe and husband, forwarded an email he received from someone who reads The Consumerist.

"This is a copy of an email I received this weekend. Nice people," he says...

Dunk your head in the brine-flavored ice-cream , after the jump...

"Dear Amy,

What I really love about Amy's is...

You really need to go to school and take some classes on business. You have no idea how to treat customers. I read your response to "Mike's" letter about credit card fees. You are a mean bitch who has no business sense what so ever. I will never eat your icecream and will encourage other no to as well. Really, get some lessons on customer service.

We replied to Steve, "Welcome to the unfiltered horror of the Internet."

Cluck, cluck, such scamps you are. However, if you want to do something constructive, send a similarly pointed letter to VISA and ask them to stop charging so many fees to process transactions.

In contrast, here are some quotes about Amy's Ice Cream from their website:

"Amy believes that a customer deserves more than just ice cream." - Wall Street Journal

"...sells terrific products and gives excellent service." - Inc.

"Even more than the ice cream, the scoopers and their trademark schtick...keep the customers coming back for more." - Texas Monthly.

Perhaps the customer service acumen behind the scoop should be applied more liberally to their email exchanges with customers.

Previously: Amy's Ice Cream thread.

Mike went to Amy's Ice Cream, the store that Stephen originally complained about for requiring a minimum credit card charge of $10.

We're not trying to run Amy (pictured, seated far right) out of business, we just think it's interesting that the merchant credit card processing rules prohibit requiring a minimum purchase amount, yet many stores do it anyway.

If it was important enough to pay lawyers to draft the language into contracts and the ink to print it out, obviously someone, somewhere, thought businesses shouldn't do this. However, the bad guys aren't the ice cream parlors, it's the banks and their usurious fees, which then get passed down to the consumer.

Mike wrote a letter and Amy's ice cream shoppe wrote back, after the jump...

Mike scribed:

"Dear Amy,

I was unhappily disappointed with my last visit because...
I just went to your location last night. I am 28 years old. I have zero kids, and 1 girlfriend. That means that if my whole family goes to Amy's and I order what I order and she orders what she orders the total is $8.88. I was greeted with a sign that says we do not accept credit card transactions under $10.00. I do not carry cash, I have not carried cash since about 2001. Cash is dirty, not easily replensiable, and slow. There is no real possibility that I am going to spend 10 dollars ever at an Amy's at one time. We go to Amy's often. We will not be going if I have to stop somewhere and get cash first. It is too much of an inconvience to me.

This new policy doesn't really fly with me, you are not a small company any longer, you have 10 locations, and I am sure more are coming.

Also I am not sure if you are aware of your agreement with VISA/MC but in your requirements as a credit card merchant, you are not allowed to require a minimum amount to use a credit card transaction. If they had found out about this restriction, you can have your credit card merchant account taken away.

All these factors have left me quite upset with this whole thing. I can't even spend 10 dollars at Amy's, you are not a small company anymore, and it is against the rules of being a VISA merchant.

I hope you will reconsider this policy.

Also your new policy has made internet headlines, at a consumer watch dog website."

Amy's reply:

Dear Mike,

First, we are a small mom and pop, we still answer the emails, there isn't a PR department or marketing wing to answer you complaint. I am sorry that this sigjn upset you. We are trying to keep costs down, so we don't have to raise prices. Do you realize that your $8.88 transaction can cost up to 10% to process? Do you want us to raise prices to $9.76 for you? The credit card companies charge us a transaction fee, a % of sales fee, a fee if the credit card is not read and has to be hand entered, a fee if we don't have the billing address zip codes... Are you following me? Tiger Woods is not getting $14 million dollars a year from annual fees. We are facing ever increasing costs for gas, insurance, workers comp etc... None of which you care about, but need to know because I am sure you don't want us to increase our prices. As for the Visa cards coming to get our account... that would be our lucky day, we spent close to $50,000.00 last year on credit cards. Do our customers spend more because we except credit cards? No, you can only eat so much ice cream. I appreciate you listening to our side, please try to understand. Thanks for the feedback,

Amy and Steve

All of them explicitly prohibit requiring minimum credit card charges.

So then, you should be able to buy that pack of gum, or cup of joe with a credit card if you want to. And if a store makes you pay a minimum charge, you can often write them up.

What's a small business to do? Well, as Digg reader Steger suggests, they can raise the prices and offer cash customers a discount.

After the jump, a compendium of the rules, taken directly from the contracts the merchants signed with the credit card companies...

DISCOVER NETWORK

A. As per page four (4) of The "Merchant Operating Regulations," incorporated into the "Merchant Services Agreement" as Exhibit A, expressly prohibits the following merchant conduct:

3.0 GENERAL REQUIREMENTS

3.1 Surcharges
Unless otherwise agreed upon by us in writing, you may not impose any surcharge, levy or fee of any kind for any transaction where a Cardmember desires to use a Card for any purchase of goods and services.

3.6 Minimum/Maximum Dollar Limits and Other Limits
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.

3.7 Equal Treatment of Card Sales versus other Cards
You may not institute or adopt any practice that discriminates or provides unequal treatment for users of a Card versus any other card products that you accept.

MASTERCARD INTERNATIONAL INCORPORATED

A. As per pages two-twenty one (2-21) through two-twenty two (2-22) of the "Merchant Rules Manual," the following MasterCard Rules are imposed on merchant conduct:

9.11 Honor MasterCard Cards

9.11.1 Honor All MasterCard Cards
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.

9.11.2 Cardholder Identification

A merchant must not refuse to complete a MasterCard card transaction solely because a cardholder who has complied with the conditions for presentment of a card at the POI refuses to provide additional identification information, except as specifically permitted or required by the Standards. [Note: The "Merchant Rules Manual" at page two-two (2-2) provides that "As used herein, Standards means the bylaws, rules and policies, and the operating regulations and procedures of the Corporation, as may be amended from time to time.] A merchant may require additional identification form the cardholder if the information is required to complete the transaction, such as for shipping purposes. A merchant in a county or region that supports use of the MasterCard Address Verification Service (AVS) may required the cardholder's ZIP or postal code to complete a cardholder-activated terminal (CAT) transaction, or the cardholder's address and ZIP or postal code to complete a mail order, phone order, or e-commerce transaction.

9.12 Prohibited Practices

9.12.1 Discrimination

A merchant must not engage in any acceptance practice that discriminates against or discourages the use of MasterCard cards in favor of any other acceptance brand.

9.12.2 Charges to Cardholders

A merchant must not directly or indirectly require any MasterCard cardholder to pay a surcharge or any part of any merchant discount or any contemporaneous finance charge in connection with a MasterCard card transaction. A merchant may provide a discount to its customers for cash payments. A merchant is permitted to charge a fee (such as a bona fide commission, postage, expedited service or convenience fees, and the life) if the fee is imposed on all like transactions regardless of the form of payment used.

• A surcharge is any fee charge in connection with a MasterCard transaction that is not charged if another payment method is used.

• The merchant discount fee is the fee the merchant pays to its acquirer to acquire transactions.

9.12.3 Minimum/Maximum Transaction Amount Prohibited

A merchant must not require, or post signs indicating that it requires, a minimum or maximum transaction amount to accept a valid MasterCard card.

B. As per page two-nineteen (2-19) through two-twenty (2-20) of the "Merchant Rules Manual," any violation by a merchant of the aforementioned MasterCard Rules is addressed as follows:

9.5 Merchant Noncompliance

9.5.1 Specified Rules Violations

If the Corporation becomes aware that any merchant has violated any of the following rules:

• Honor MasterCard Cards (section 9.11);

• Use of the MasterCard Mark (section 9.10);

• Charges to Cardholders (section 9.12.2);

• Minimum/Maximum Transaction Amount Restrictions (section 9.12.3); or

• Prohibited Transactions (section 9.12.4),

The Corporation will notify the acquirer of the violation and request that it take action to ensure that the merchant discontinues promptly, and in no more than 10 business days, the violative practice. A notification by the Corporation of a violation at any one merchant location requires the member to ensure that the practice is discontinued at all locations covered by the merchant agreement(s).

9.5.2 Assessments

If the Corporation's staff becomes aware of any merchant or any DSE in violation of section 9.15 of these rules, the Corporation may identify and advise the acquirer of such violation, and may impose an assessment for noncompliance of up to USD 100,000 per individual violation, with a maximum aggregate assessment of USD 500,000 for additional or continuing violations during any consecutive 12-month period.

In addition, if a merchant or any DFS is determined to be in violation of section 9.15, or if a member is determined to be in violation of section 3.7 of these rules, and if such violation results in compromised account information, the acquirer must comply with the requirements set forth in section 5.12 of the Security Rules and Procedures manual.

C. Furthermore, the "Frequently Asked Questions" portion of the website maintained by MasterCard International Corporation directs a consumer to "Please complete and Submit the Merchant Violation form to report a merchant/retailer that did not accept your MasterCard card." The Merchant Violation form asks the consumer to:

Provide the following information if you have experience a problem with a merchant/retailer who displays the MasterCard brand mark (logo) at their store location but would not accept your MasterCard card for a purchase. Or for a merchant who refuses to accept payment below a certain dollar amount with your MasterCard card.

The end of the Merchant Violation form also asks the consumer to delineate the type of violation as either of the following:

• In order to make a MasterCard purchase, the merchant/retailer required a minimum or maximum amount.
• The merchant/retailer is adding a charge for using your MasterCard card.
• The merchant/retailer required identification.
• A merchant/retailer displaying the MasterCard decal in their window refused to accept my MasterCard card.

VISA U.S.A. INCORPORATED

A. As per page ten (10) of the "Rules for Visa Merchants: Card Acceptance and Chargeback Management Guidelines," the following Visa Rules are imposed on merchant conduct:

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.

No Surcharging - Always treat Visa transactions like any other transaction; that is, you may not impose any surcharges on a Visa transaction. You may, however, offer a discount for cash transactions, provided that the offer is clearly disclosed to customers and the cash price is presented as a discount from the standard price charged for all other forms of payment.

[Note: As per the disclaimer appearing on page four (4) of the "Rules for Visa Merchants:"

This guide contains information based on the current Visa U.S.A. Inc. Operating Regulations. If there are any technical differences between the Visa U.S.A. Inc. Operating Regulations will prevail in every instance. Your merchant agreement and the Visa U.S.A. Inc. Operating Regulations take precedence over this guide or any updates to its information.]

B. Furthermore, the "Ask Visa" portion of the relevant website provides the following:

Minimum Purchase
Visa merchants are not permitted to establish minimum transaction amounts, even on sale items. They also are not permitted to charge you a fee when you want to use your Visa card.

If you run into a problem like this with a merchant, please notify the financial institution that issued you your Visa card. These institutions have access to the appropriate Visa rules and regulations and can help you document and file your complaint. You'll find their address and/or telephone number on your Visa statement. Their telephone number may also appear on the back of the card itself.

AMERICAN EXPRESS

"As an end note," writes Erik, "I did an exhaustive search on the American Express website and found no information on the subject. Apparently they don't care enough about these issues to inform consumers what merchant conduct is acceptable by way of the agreement. I called American Express twice. It took three minutes each time to reach both Fredrick and Marlin respectively. Each persona possessed a noticeable accent so I can't even be sure I got their names correct. As with Fredrick I asked four questions. First, does the typical merchant agreement permit merchants to require that consumers make a minimum purchase in order to use an American Express card? Fredrick told me some merchants may do this and typically do so to cover or pass along the fees American Express charges the merchant for use of the service. He also stated that while the merchant is not supposed to do that and the agreement the merchant signs says as much, American Express cannot enforce this requirement because it may not be practical and/or the merchant is acting as a private entity. I wasn't sure what he meant by this but at least I learned that the American Express merchant agreement should contain a provision precluding this type of merchant conduct. Second, I asked Fredrick whether merchants may charge consumers a fee for using their American Express card. Fredrick was noticeably more concerned and quickly told me that consumer in those situations should promptly call the customer service number ( i.e. 1 (800) 528-4800) and provide the merchant's name and address. Presumably you'd want to provide the merchant's telephone number too but I didn't probe any further. Third, I asked Fredrick whether I could obtain a copy of the American Express rules and regulations in the merchant agreement, etc. that covered these issues? He told me no. I asked whether they were available online? He politely put me on hold and returned 3 minutes later. He explained such information was not available online and any consumer complaints should be directed to the customer service number. We parted ways and I thought about the experience for a minute. Fredrick didn't seem fully confident in his responses so I called again, hoping for some confirmation or clarity. I got Marlin instead. I didn't even get through the first question. Maybe I didn't explain myself clearly enough but when asked whether merchants can requirement a consumer to make a minimum purchase to use their American Express card, Marlin simply said "There's no such thing here with American Express." Go figure. I thanked him for his time and hung up."

We wanted to get clarification on whether merchants are allowed to say you must purchase a minimum amount in order to use a credit card. We called up VISA. The CSR said that it was definitely illegal and in violation. She said that if you had a problem with the fee, you need to file call your bank to whom your credit card is tied to and file an incident report. When pressed further to find out what sort of punitive measures the bank might take, the rep stonewalled us and kept telling us to talk to our bank. She said she didn't have that info and refused to transfer us to someone who did.

We then called Washington Mutual. A tier 1 rep, after checking with her supervisor and credit card services, said that stores are allowed to require a minimum charge to cover the transaction fee they have to incur.

When we noted out that this directly contradicts the rules issued by VISA (see pg 14), she told us to call VISA. We pointed out that VISA told us to call our local bank. The rep said, "Well I don't know what to tell you then."

What's the deal?

UPDATE: We went back to VISA with the new info. A friendly Southern man told us that it was definitely a violation of the rules. He also said, "The banks are VISA, let's put it that way." Good to know. When we pressed for more clarification and told him about the merchant guidelines document, we were put on hold several times.

Then he hung up on us.

Previously: Requiring Minimum Credit Card Purchases is a Violation

Check out page 14 of the Rules for Visa Merchants [pdf].

Might be something to print out and keep in the 'ol wallet.

UPDATE: The pdf linked to was encrypted so it could only be viewed, not printed, here's a printable version, thanks to Will!

Stephen of Texas figured the jigger out after he went to an ice cream parlor that wanted a $10 minimum charge. His Butterfinger Vanilla melting letter, after the jump...