We've all seen the signs in stores; often they're hand-drawn in big block letters: "MINIMUM FOR CREDIT CARDS: $X." In our increasingly cashless society consumers don't like them, as this steals away the convenience of using plastic to buy low-priced items.
In the old days, the setting of such minimums was typically banned by the top credit card companies in their merchant agreements. These days, thanks to a law passed a few years ago, the legalities of doing so are a bit more complicated.
At the risk of disappointing impulse chewing gum buyers throughout the country, the skinny is that merchants in America can impose minimums on credit card purchases.
Within a certain limit, that is. The maximum for the minimum, so to speak, is $10. Any amount above that is illegal according to Federal law. Also, any merchant setting a floor must apply it at the same level for all credit cards it accepts, regardless of brand, issuer, or type.
This legislation occupies a tiny corner of the Dodd-Frank Wall Street Reform and Consumer Protection Act -- the monster law passed in the wake of last decade's financial crisis tightening oversight of money industries such as banking.
The legal sanctioning of credit card minimums was a win for the retail and small business organizations who lobbied for it. The argument -- certainly within reason -- was that paying the various fees credit card processors charge for a transaction could actually cause a merchant to lose money on a buy that's small enough.
Since the change theoretically puts (thousands of small) dents in the business of the credit card companies, we can assume they weren't too happy with this development.
It's not like they've suffered much from it, though. For 2014 none of the four incumbents, Visa (NYSE:V), MasterCard (NYSE:MA), American Express (NYSE:AXP)(which previous to the law actually permitted minimums, as long as they applied equally to other cards) and Discover (NYSE:DFS), posted lower annual revenue or net profit numbers than in 2010, the year Dodd-Frank was passed.
But the card portion of the law does not address debit and pre-paid products. So not surprisingly, the two brands that transact a relatively high number of purchases on these instruments -- Visa and MasterCard -- specifically ban the setting of any minimum on them.
Visa, for one, obviously considers this important to get across. In the current version of its guidebook for merchants, it's right on the first page of the "Visa Rules for General Processing" section. It says unambiguously that sellers must "[e]nsure minimum transaction amounts, which may be no greater than $10, are imposed on Visa credit card transactions only." (Emphasis mine).
It isn't clear why the Feds failed to include debit products in the legislation. Perhaps, given that the card giants were sure to insist on the no-minimum rule in their agreements, it was a deliberate omission aimed at giving that important third party in a card transaction -- the consumer -- a break. And one that didn't hurt merchants too much, as processing fees for debit instruments are notably cheaper than for their credit brethren.
Americans can buy their gum with plastic after all, as long as it's the right kind of card.
How to report the violators
So, that's the deal. Minimums are entirely legal and valid, as long as merchants limit them to $10 in purchases and apply the chosen limit equally to all accepted cards. Minimums for debit instruments are not mandated by law, but usually banned as per card companies' merchant agreements.
If your local stationery store or deli is trying to get away with a minimum over that $10 for credit card purchases, you can and should report this to the card issuer and/or payment network. The same goes for any minimum, no matter how small, attempted for debit cards.
Visa, for one, has a web page dedicated to merchant violations of both the credit card minimum and its own debit/prepaid card rule, among other transgressions, featuring an easy-to-fill interactive form. A similar page for MasterCard is located here.