Can I impose a minimum transaction of $10 for card purchases?
You may set a $10 credit card minimum, but that doesn't mean you should
Elaine Pofeldt is a journalist whose articles on entrepreneurship and careers have appeared in Fortune, Working Mother, Money and many other publications. She is a former senior editor at Fortune Small Business magazine and an entrepreneur herself, as co-founder of 200kfreelancer.com. Her book, “The Million-Dollar, One-Person Business,” was released in 2018. She writes "Your Business Credit," a weekly column about small business and credit, for CreditCards.com.
Can my business require a minimum transaction of $10 to use a credit card?Yes, federal law allows merchants to require a minimum transaction amount of up to $10, but beware of how it could affect your customer relationships.
Dear Your Business Credit,
I want to ask a question. I want to request that the minimum for credit card use is at least $10. Is it legal? – Suet
Yes. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 permits businesses to impose a minimum purchase amount of up to $10 for credit card use, but the minimum must be the same for all credit card issuers and payment card networks.
Rules for imposing a minimum transaction
Additionally, the card processing networks have their own set of rules for imposing a minimum transaction amount.
There are some rules around this that are important for you and your staff to understand. For instance, with Visa cards, its merchant instructions say you can’t impose the minimum transaction on people who use debit cards. That may seem simple enough, but if a customer presses the credit key when swiping a debit card and your staff thinks it was a credit card transaction, you could end breaking the rules. As Visa pointed out, “it can get complicated if your staff doesn’t know how to differentiate between a credit card and debit card.” (The link above will point you to a page where Visa explains the difference.)
And while you are not obligated to disclose you have a minimum transaction, Visa says being clear about it is a best-practice that will help you to avoid confusion among your customers.
Mastercard has published similar rules. In its rules, Mastercard doesn’t allow merchant to set a minimum transaction for some of its cards but not for others, depending on the issuer. American Express has a similar policy.
Beware of harming customer relationships
As to whether you should impose a minimum transaction, that’s a different story. Often, merchants impose a minimum because on small purchases, the processing fees for credit cards can eat up the profits on selling an item, as I’m sure you’ve figured out.
However, you have to weigh the potential financial benefits of refusing small transactions against the fact that not accepting the cards will inconvenience some of your customers. Many people conduct almost all of their transactions electronically these days and don’t carry much cash. If you turn them away when they are in a pinch, they may decide to take their business elsewhere in the future.
If it is only a rare occasion when customers try to charge a very small purchase, then it may not be worthwhile to say no to them. What difference does it make if you don’t keep the profit on one can of soda a month? Where credit card processing fees can really add up for small merchants is in stores that do a high volume of transactions, such as gas-station convenience stores.
Other options for cutting transaction costs
To avoid having to turn people away, some merchants incentivize customers to buy more. For instance, you could run a classic, buy two, get one free promotion or something along those lines, or offer an attractive discount if customers buy a large size of a product you sell.
Consumers make many decisions based on emotion, including where to shop. The more welcome they feel, the more likely they will be to spend their money with you.
Tip: Instead of requiring a minimum purchase to use a card, try incentivizing customers to buy more by offering discounts for bulk purchases or bundling different products for a deal.
See related: Charging customers to use credit cards
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