Many businesses wonder: Is it legal to require a minimum purchase amount for card transactions?
The short answer is: Yes and no. The longer answer is that it depends on the type of card. You’ll have to follow applicable rules as well.
Credit cards:
Yes. It is acceptable for you to set a minimum charge on credit card purchases as long as you abide by the stipulations as set forth in your processing agreement with Visa, Mastercard and Discover.
Debit cards:
No. It is not acceptable for you to set a minimum charge on debit card purchases.
Let’s take a closer look at the rules and requirements for imposing minimum purchase requirements when a customer pays by credit card.
- The Current Regulations
- Why Minimum Charge Amounts are Now Allowed
- How it Used to Be
- For Consumers
The Current Regulations
You may set a minimum purchase amount on credit card purchases so long as you abide by the card brands’ requirements.
American Express is (and always has been) largely silent on the issue of minimums. It’s generally regarded as acceptable to apply terms set forth by Visa, Mastercard, and Discover to American Express.
Here are the finer details regarding minimum charge restrictions on credit card purchases.
The minimum purchase amount must be $10 or less.
As I outline a little farther down, the Federal Reserve has the power to adjust the minimum purchase amount. So, although the Federal Reserve currently caps the fee at $10, it can change. Visa, Mastercard, and Discover all note the $10 cap for credit card minimums in their documentation for businesses.
You may not differentiate among card-issuing banks.
In other words, you can’t impose a minimum purchase amount on cards issued by one bank and not another. For example, you can’t impose a minimum on cards issued by Citi Bank when not imposing a minimum on credit card issued by Bank of America.
You may not differentiate among card brands.
In other words, if you choose to set a minimum charge, the minimum must apply to Visa, Mastercard, and Discover equally.
Here are the excerpts from the published operating literature of the big three concerning minimum purchase amount for credit cards:
“Merchants may require minimum purchase amounts on credit card transactions. The minimum purchase amount must not exceed $10 (or other amount as set by law), does not apply to transactions made with debit cards, and cannot differentiate on the basis of the issuer or payment card network.” – Visa
“MasterCard permits any U.S. merchant to set a minimum transaction amount (not to exceed USD 10 or any higher amount established by the Federal Reserve by regulation) to accept MasterCard cards that access a credit account. MasterCard does not permit merchants to set a minimum transaction amount to accept MasterCard cards that access a debit account.” – MasterCard
“You may not require that any Card Sale or Cash Advance involve a minimum dollar amount before a Cardholder may pay using a Card, except to the extent restrictions on such practice are prohibited by Requirements of Law, and effective upon publication of Release 11.1 of these Operating Regulations, you may require that a Card Sale or Cash Advance with a Credit Card (but not a Debit or Prepaid Card) involve a minimum dollar amount of up to $10, subject to the restrictions in Section 2.4.” – Discover
Note that the excerpts reference the $10 cap on minimums, specify that debit card transactions are exempt, and state that the minimum can’t differentiate based on issuer or payment network.
Why Minimum Charges Are Allowed
Until 2010, the card brands didn’t allow minimum charge amounts on credit card transactions. They didn’t want businesses to discourage use of cards to make purchases. So why the change of heart? You can thank Uncle Sam, or more specifically, Senator Durbin.
Thanks to the Durbin Amendment, the Federal Reserve has the power to regulate minimum amounts for credit card purchases. The Federal Reserve set the current limit at $10 or less.
The portion of the Durbin Amendment pertaining to minimum purchase amounts on credit card transactions reads as follows:
“(3) NO RESTRICTIONS ON SETTING TRANSACTION MINIMUMS OR MAXIMUMS.–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 of any person to set a minimum or maximum dollar value for the acceptance by that person of any form of payment.”
In this excerpt, the text clearly states that payment card networks can’t prevent a person from setting a minimum or maximum amount for payments. The above text was taken from the website of the U.S. Government Printing Office.
How It Used to Be
As you can imagine, minimum purchase amounts on credit card transactions aren’t exactly in the card brands’ best interests. After all, they make money when consumers use their cards. Until the Durbin Amendment, minimum purchase amounts were against the processing agreements of all four major card brands.
Here’s what the card brands used to say prior to Durbin:
“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.” – Visa
“A Merchant must not require, or indicate that it requires, a minimum or maximum Transaction amount to accept a valid and properly presented Card.” – MasterCard
“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.” – Discover
All three companies very clearly prohibited imposing minimums in order to use their cards. These days, the brands all acknowlege that minimums are permitted by law, but only on credit card transactions.
For Consumers
We receive quite a few emails from people upset about minimum charges on credit card purchases. I understand that a minimum can be a little frustrating, but try to see things from the business’s perspective.
Business owners often lose money on small credit card transactions after paying their credit card processing fees.
In most cases, there is no need to report businesses that impose minimum transaction amounts on credit card purchases since the practice of doing so is now deemed acceptable by the major card brands. However, if a business imposes a minimum more than $10 or requires a minimum on debit card purchases, you can choose to report that business to Visa or Mastercard. Before reporting, it’s always a good idea to speak with the owner or manager. Regulations change frequently and the business may be unaware of the latest requirements.
