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You’re at your local convenience store. You have some pocket change to buy a pack of gum, your debit card and your favorite rewards credit card — that’s it. That Red Bull in the case near the register looks pretty good right about now, so you grab one, then whip out your rewards credit card and get ready to scan it as soon as you get the total.
The guy behind the counter — probably the owner, since this is a local shop — stops you, and directs your attention to a sign. “Minimum $10 purchase required for all credit card transactions.” But wait. Is that even legal?
It’s not prohibited by law, but it is against credit card issuer regulations in most cases. Three out of four major credit card issuers — Discover, Visa and MasterCard — strictly prohibit minimum purchase requirements to use their credit cards. American Express doesn’t have such a policy, but they do have a policy prohibiting merchants from discriminating against customers who use their card. In other words, if the store doesn’t have a minimum purchase policy for Discover, Visa and MasterCard users, it can’t put a policy in place just for American Express CardMembers. Imposing a maximum charge (as long as it’s within the users credit limit and available credit) is also prohibited.
So why do merchants do this? And how can they get away with it? Most importantly, what can you do about it?
First, let’s talk about why. Three reasons:
1. Merchants may not realize it’s against policy to impose minimum or maximum charges.
2. They know it’s against policy, but want to get you to buy that extra Red Bull or three because you don’t have cash on hand. It’s a sneaky way to upsell, and since so many people don’t carry cash, it works.
2. They can’t afford the fees imposed by the credit card companies, especially on small purchases.
Most small businesses are not out to break the rules or make their customers unhappy by imposing minimum purchase restrictions. Merchants may pay an interchange rate for each transaction, which is a flat rate of 15 to 25 cents or more, plus 1 to 5% of each purchase, on top of terminal rental fees if they don’t have their own credit card equipment. On very small purchases — like that pack of gum — small business may actually lose money.
Those rewards card that pay us cash back and other fun benefits are partially to blame. The money has to come from somewhere, so banks who issue rewards cards charge higher fees to their vendors. Most vendors today are essentially forced to accept credit cards, otherwise they’d lose business, so they’re stuck with the fees.
Out of courtesy to local mom-and-pop shops, it’s a good idea not to use your credit card for purchases under $15 or so. But it’s good to know that when you have to, you should be permitted to do so.
The action to take if a store imposes a minimum charge requirement depends on how badly you want the item and how much you are willing to do to get it. First, ask politely if they would waive the requirement for you because you don’t have any cash right now and you need [inexpensive item]. If that doesn’t work, you might tell them — still politely — that it’s against credit card policy to impose a minimum charge requirement.
If that doesn’t work — and you’re dead set on purchasing this item from this store — ask to speak with a manager. Again, explain the regulations. If he still won’t waive the fee, you can make the choice of whether you want to add some more merchandise to your order, or just walk away.
If you’re really irked, you can report the vendor to the credit card companies for the violation. But when you think about it from the business owner’s perspective, you may decide to stick with cash at small, locally-owned businesses. Save your credit card for larger purchases, where store owners won’t feel the impact of the fees quite as much, or for shopping at mass market retailers who can easily absorb the fees.