Shoppers who want to use their credit card for purchases under $10 are facing an ever more familiar sight in smaller or independent stores - a sign, often at the register, informing them that credit cards are welcome, providing their purchase totals at least $10 or more. It can be frustrating for those who don't carry cash, forcing them to buy unnecessary items or abandon their purchases altogether. On the other hand, the practice saves merchants from paying the transaction fees charged by credit card companies, even if it does inconvenience some consumers.
Those keen on supporting their local stores may want to think about using cash.
Is it legal, though? Can merchants really impose a minimum amount before they take credit cards?
Many consumers believe that any minimum requirement for using a card is illegal and, up until 2010, they would have been right. Although the practice was common even then, card networks mostly prohibited sellers from placing minimum purchase thresholds, aiming for universal acceptance. Consumers were even able to report retailers who imposed such requirements. Notably, American Express allowed retailers to set transaction minimums as long as the minimum was applied to all cards accepted by the store. In all cases, stores were required to negotiate the terms they had with credit card companies.
Still, businesses facing narrow profit margins found that the fees associated with accepting credit cards - either a percentage of the transaction or a flat fee, or even both - made the practice unsustainable when processing small purchases. Paying with cash makes no difference to a merchant whether a consumer spends $1 or $100, but credit card fees on a $1 purchase made the transaction barely profitable. A coalition of retailers and business organizations proposed the law be changed to allow a simple $10 transaction minimum to be adopted by those who chose to. In the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, on page 698 of an 848-page document, the proposal was adopted.
Requiring a minimum transaction amount when using credit cards became perfectly legal, endorsed by Congress itself. While consumers might find this frustrating at times, retailers now have the justification required to avoid costly credit card fees on smaller transactions.
Consumers, however, are not entirely forgotten. It remains illegal for debit card purchases to have minimum requirements attached and the credit card requirement is capped at $10. Any further requirements may be illegal and consumers can report suspected violations to credit card companies. Stores are, of course, free to set their own requirements at any figure below $10 or to accept credit cards, no matter the sum. Those keen on supporting their local stores may want to think about using cash whenever possible. Profit margins may be tight for mom and pop stores, but the rules for card use are now, at least, clearly laid out.
Author Bio: Austin Tighe, a member of the American Bar Associations' Advisory Panel, is an experienced lawyer admitted to practice in the Supreme Court and all Federal Courts in both Texas and Illinois. He is co-lead counsel in multiple ongoing class action lawsuits and co-chair of the Austin Bar Association's People's Law School, and works as an attorney with Feazell & Tighe LLP.