Credit Card Minimum
Did You Know?American Express allowed its merchants to set minimum purchases before the Dodd-Frank regulation was introduced. Their criteria was to have all credit cards treated equally in terms of the minimum amount being imposed.
It is common to come across handwritten signs and printouts requiring credit card users to buy things worth a minimum of USD 10 in order to have their cards accepted by retailers. However, some customers simply get offended and decide against making a purchase the moment they are asked to spend more than they originally planned for.
Credit card networks unanimously prohibited retail and business organizations from setting any minimums for credit card users until 2010. The objective behind disallowing minimums was to make credit cards as acceptable and easily accessible as cash. However, the restriction imposed on minimum purchases by merchants, set the credit card apart and alienated customers further.
Congress was asked to look into the matter by a coalition of small business owners and retailers, who wanted to legalize the imposition of minimum purchases for credit card users. Their contention being, that the retailer incurred expenses by accepting cards for small transactions. The smaller the purchase of a customer, the more unprofitable it would be for the retailer to accept the credit card. Since, every time a credit card is swiped, the flat fee as well as a part of the customer's total is deducted from the retailer's share. So, the retailer gets a lesser percentage as compared to what the customer is spending, because while the issuing bank subtracts an interchange fee, the acquirer deducts a discount fee for every transaction.
This point stands true for small retail and business owners, who do not enjoy a big profit margin, and thus, cannot afford to incur further expenses while accepting credit cards for low purchases, which can be easily paid in cash instead.
Is Credit Card Minimum Legal?
While it is understandable that the customer wouldn't be too happy to buy more than he bargained for, the fact of the matter is that, the merchant is well within his rights to set a minimum amount. This familiar notice behind cash registers is valid, and has been sanctioned under the Dodd-Frank Wall Street Reform and Consumer Protection Act, which explicitly states on page 698 of the Act that:
''(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;..."
The Dodd-Frank Act was signed into law in July 2010, and has since then allowed the Federal Reserve to monitor and increase the minimum payment, if needed. The Act made it legal for retailers to set the aforementioned minimum purchase from credit card transactions, as long as it did not exceed USD 10.00.
The act also requires that retailers treat all cards equally, which means that they cannot arbitrarily increase the minimum payment amount the moment a corporate or reward card shows up. Nor are they allowed to impose such a minimum on debit cards. Debit card giants such as Visa and MasterCard do not allow retailers to impose any minimums on debit cards. These debit card networks also provide their customers the option to report to their card issuer in case a minimum purchase is wrongfully imposed on them by a retailer.
Those affected the most by this regulation are the cashless customers, who do not find it conducive or cost-effective to abide by the minimum purchase imposition. Such customers will have to choose between buying more than they planned, or not buy anything at all.