Watch Out for Merchant Credit Card Minimum Purchase Requirements

Imagine walking to the cash register of a convenience store with a bag of chips and a soda, intending to pay with your credit card, and seeing a sign that requires a minimum $10 purchase for credit card use. If you don’t have cash or an alternate method of payment, what are you going to do? Put the snacks back on the shelf, or pick up a few more items, enough to meet the $10 requirement. You’d probably go ahead and buy the extra items rather than create a bigger inconvenience by going to get cash or going to a store that doesn’t impose a minimum card purchase.

Up until a few years ago, merchants weren’t allowed to require a minimum credit card purchase per their agreements with credit card issuers. However, a new law allows merchants to impose a minimum as long as that minimum applies to all credit cards. Merchants can’t charge minimum purchases for one type of credit card and not another. They also can’t impose different minimum purchases for different credit cards.

Minimum credit card purchase requirements can be extremely inconvenient, especially if your pay is directly deposited into your account and you typically pay all your bills online. But, you may need to start making periodic trips to the ATM, even for just a small amount of money to cover purchases under $10. Just make sure you visit an ATM inside your network to avoid withdrawal fees, which would be just as wasteful as purchasing extra items to meet the minimum credit card purchase requirements.

Even though they’re legally allowed to, not every merchant will ask you to purchase a minimum amount just to use your credit card. In fact, you may find that more businesses than not will accept transactions for purchases in any amount, even a couple of dollars. However, gas stations and small convenience store are more likely to require a minimum purchase for credit cards.

Why would businesses require a minimum at all, especially when they haven’t in the past? Credit card fees are cutting into business profits. Businesses have to pay to give customers like us the convenience of using a credit card. Credit card processing networks charge processing fees from 1% to 3.5% of the transactions depending on the card you use and the merchant’s agreement with that processing network. There may sometimes be a flat fee paid for each credit card transaction.

Some businesses can afford to take on the fee, for example, because they have enough revenue to cover the cost. Or, they can increase prices enough to offset the fee. However, some businesses lose a lot of money on processing fees, especially on smaller transactions, e.g. those under $10.

Note that the minimum purchase amount may not apply to debit card transactions, i.e. those that require a PIN. However, if you use your debit card as a credit card, where you sign for the purchase, that type of transaction may be subject to a minimum amount requirement.

Source: FTC.gov