Charging A Minimum on Credit Card Transactions
Posted by Jeff Shavitz on Fri, Nov 13, 2009 @ 11:15 AM
Charging a Minimum on Credit Card Purchases
One of the most contested issues in credit card processing is whether a merchant should have the ability to impose a minimum purchase amount on credit card transactions. At one point or another we've all walked into a store to make a quick purchase and after seeing a sign that read "minimum credit card purchase $10," realized we didn't have any cash.
Merchants set a minimum on credit card purchases to avoid losing money on smaller transactions where processing fees are larger than the profit made on the sale. While it makes business sense to do this, three of the four major card brands specifically forbid doing so and violating these terms can be detrimental to their merchant account.
Visa says "Always honor valid cards in your acceptance category, regardless of the dollar amount of the purchase. Imposing maximum or minimum dollar amounts in order to accept a Visa card transaction is a violation of the Visa rules."1
MasterCard says "A Merchant must not require, or indicate that it requires, a minimum or maximum Transaction amount to accept a valid and properly presented Card."2
Discover says "You may not require that any Cardholder make a minimum dollar purchase in order to use a Card and you may not limit the maximum amount that a Cardholder may spend when using a Card except when the Issuer has not provided a positive Authorization Response for a Card Transaction."3
American Express doesn't specifically mention guidelines regarding minimum purchase amounts but they do publically discourage any practice that would hinder card acceptance. American Express has also gone on the record saying that they don't condone the practice.
Credit card companies discourage minimum purchase amounts because they don't want to lose money when consumers are excluded from using their card. Similarly, merchants don't want to lose money on merchant account fees when customers use their card to make a small purchase. Who's right or wrong is a debate that can go on forever. What matters is who has the power and in this case it's the credit card originators like Visa and MasterCard.
Some merchants will continue to dictate a minimum on credit card purchases regardless of whether the practice is allowed.
courtesy of: merchantcouncil.org
For more information or to find out if you are paying the lowest possible processing fees on your merchant account, contact CCS for a FREE RATE ANALYSIS.