Can You Set A Minimum Purchase Amount For Credit & Debit Card Payments?
Learn the rules and laws about setting credit and debit card minimum purchase amounts, find out when it makes sense to have a policy, and understand when you should cut your losses.
Minimum purchase amounts for credit card transactions are legal, but implementing them for your business may require some additional research. In this article, we’ll review the laws and agreements that govern setting a minimum amount on credit and debit card transactions.
We’ll also discuss the pros and cons of doing so, even in situations where it’s perfectly legal. After all, you don’t want to risk losing sales when customers either can’t or don’t want to buy enough items to meet your required minimum.
Finally, we’ll review the differences between setting a minimum purchase requirement on credit card and debit card transactions.
Table of Contents
- What Is A Minimum Purchase Amount?
- Is A Minimum Purchase Amount Legal?
- Can Stores Charge A Minimum For Debit Cards & Credit Cards?
- Considerations Before Implementing A Minimum Purchase Amount
- Other Ways To Save On Credit Card Costs
- How To Implement Minimum Purchase Amounts
- The Bottom Line On Minimum Purchase Amounts
What Is A Minimum Purchase Amount?
A minimum purchase amount is the smallest transaction value at which a customer can pay by credit card. Businesses are legally allowed to set minimum purchase amounts of up to $10 as a means to reduce the cost of processing smaller transactions.
For example, if you set a minimum purchase amount of $5, your customer would need to purchase at least $5 worth of goods or services if they want to use their credit card.
Is A Minimum Purchase Amount Legal?
Minimum purchase amounts are legal under the Dodd-Frank Act’s Durbin Amendment of 2010. However, there are several legal and contractual limitations to setting a minimum purchase amount.
According to the law and merchant agreements, businesses implementing minimum purchase amounts must not:
- Set a credit card minimum exceeding $10 for any card brand
- Set a minimum purchase amount for one credit card brand and not others
- Set a minimum purchase amount for one issuing bank and not others
Minimum Purchase Amount For Credit Cards
Merchants are allowed to set a minimum purchase requirement for credit cards. As of this writing, the highest allowable minimum purchase requirement that merchants can set is $10.00. You’re free to set a lower requirement, but you cannot set a limit above this amount.
Visa, Mastercard, and Discovery all have several stipulations on setting minimum charges in their processing agreements. The gist of these stipulations is that a minimum purchase requirement, if imposed, must treat all credit cards and all issuing banks equally.
In other words, you can’t require a minimum purchase for Visa, but not Mastercard. You also can’t set a minimum purchase for one issuing bank, but not another.
Minimum Purchase Amount For Debit Cards
With few exceptions, the general rule is that you cannot impose a minimum purchase requirement for debit card transactions. The Durbin Amendment doesn’t prohibit debit card associations from imposing their own restrictions on minimum purchases the way it does for credit cards.
If your merchant account uses an interchange-plus or membership-based processing rate plan, the inability to set a minimum purchase requirement for debit cards won’t be a problem. That’s because both of these types of plans pass interchange and PIN debit network fees directly onto you.
On the other hand, flat-rate pricing, such as that offered by Square, charges the same rate for both credit and debit cards, essentially treating debit card transactions as if they were credit card transactions. So, you’ll be paying an unnecessarily higher cost for processing debit card transactions.
Can Stores Charge A Minimum For Debit Cards & Credit Cards?
Whether your business can charge a minimum for debit cards and credit cards depends on your processing agreements with the major credit card associations and your contract with your merchant account provider.
We recommend that you refer to those documents before setting a minimum purchase requirement. You might also consider imposing a minimum purchase requirement that only applies to credit card transactions, especially if you’re paying fair market rates for debit card transactions through your processor.
Considerations Before Implementing A Minimum Purchase Amount
In general, you should consider implementing a minimum purchase amount when you begin to rack up high processing costs that cut into profits as a direct result of customers using credit cards on low-cost transactions.
However, just because you can set a minimum purchase amount doesn’t necessarily make it a great idea. Let’s take a look at some pros and cons of minimum purchase amounts.
- You won’t lose money on small transactions
- Credit cards remain an option for your customers for larger transactions
- Simple to implement and enforce
- May improve your profit margins
- Cashless customers may not buy anything
- Your shop may be considered less convenient than a larger business that can handle the costs
- Finding the ideal minimum purchase amount may take some trial and error
- Not useful for businesses whose transactions are mostly over $10.
- You’ll need to keep more cash on hand for cash transactions.
Other Ways To Save On Credit Card Costs
Minimum purchase amounts can be a useful tool for small businesses that sell small-ticket items, but there are other ways to save money on credit card transactions. Each of these options comes with its own pros and cons, so make sure they fit your business type and strategy.
How To Implement Minimum Purchase Amounts
Most consumers are oblivious to the fact that accepting credit and debit cards costs you money, so be prepared to explain why you’re implementing the policy.
Implementing a minimum purchase requirement also means that you’ll have to educate your employees to enforce it. Make sure they understand the difference between a credit card and a debit card. This isn’t as obvious as it sounds, as most debit cards are sponsored by either Visa or Mastercard. They’ll also need to understand the difference between PIN debit and signature debit, as you usually won’t be able to enforce a minimum purchase requirement on PIN debit transactions.
If you do decide to implement a minimum purchase requirement, make sure that you set it as low as possible to reduce the frequency of lost sales and frustrated customers. Under no circumstances should you implement a minimum that exceeds $10. Customers can report you to the credit card associations, and you’ll probably have your merchant account shut down. You might even end up on the Terminated Merchant File (TMF, or MATCH list), making it that much more difficult to find a new processor.
The Bottom Line On Minimum Purchase Amounts
Minimum purchase amounts are complicated but can help businesses save on credit card processing costs. However, minimum purchase amounts aren’t the only way to help businesses save.
Choosing one of the best payment processing companies for small businesses should help you keep costs down and get great service.
If you’re within a specific industry, there are some payment processors that serve certain industries better than others. For example, some of the best retail credit card processing companies have features such as support for seasonal businesses, POS hardware integration, and processing for online storefronts.
If you’ve read this far and come to the conclusion that your best option is to switch to a different merchant account provider, we can help. Check out our Merchant Account Comparison Chart for a side-by-side comparison of the best providers in the industry.