Credit Card Minimums: Will They Work for You?

Credit card fees aren’t fun to pay – we know that as well as you. It’s why we work hard to keep our rates as low as possible so our customers can do business with ease. Paying fees on purchases of only a few dollars can be downright maddening, especially when those fees erase whatever profit you might otherwise have made on the transaction. Consider a minimum purchase requirement to eliminate or minimize the number of sales on which you lose money. While not the right fit for every business, minimum purchase requirements can help ease the burden of credit card fees.

What is a Minimum Purchase Requirement – and Is It Legal?

A minimum purchase requirement allows your customers to make payments by credit card only if their transaction totals a certain amount. This practice is legal, provided the minimum you set does not exceed $10 and that the rules are the same no matter what type or brand of credit card the customer uses. Until 2010, many of the major card networks largely prohibited minimum purchases in their merchant agreements, but a determined group of small business groups lobbied Congress to change the rules. They argued that in industries where margins are slim to begin with, allowing consumers to use credit cards to pay for even the smallest transactions made it cost prohibitive to accept credit cards at all. Congress listened, and permission for credit card minimums was slipped into the Dodd-Frank Wall Street Reform and Consumer Protection Act. Better known for the heated debate it caused over whether it unfairly protected banks deemed “too big to fail,” the legislation also enacted the minimums we have today.

Protecting Bottom Lines or Unfairly Inconveniencing Customers?

Some business owners rejoiced over the new minimums and hastily threw up hand drawn signs to announce their new rules. They were excited to protect their razor-thin profits on low-priced items, particularly in the gas station and convenience store industries. Others worried that enacting a minimum would drive customers away and send them to the competition, resulting in an overall net loss. Businesses whose average purchase was quite low to begin with often opted to skip the minimum to please their customer base.

Will It Work for Me?

In general, setting a credit card minimum can be a very good idea if your customers will tolerate it. Most customers know enough about the industry to understand that merchants must pay a fee when they use their credit cards and are willing to use cash for small purchases or pick up an extra item or two to reach the minimum. However, we are increasingly living in a cashless society. Younger generations are carrying less cash and expect to be able to pay for everything by credit card. They are more likely to walk out of a business without purchasing, if only because they don’t have any other means of payment on them.
So how can you make a minimum work for you? Take a look at your average transaction amount and determine what threshold would work for you – there’s no reason it has to be $10! You may find that setting a minimum at $5 or even $2 is enough to help protect your profits without turning away customers. Remember, too, that these minimums do not apply to debit cards. Many consumers carry their debit cards with them all the time, even if they barely use them. They may have forgotten they are carrying it or think the minimum applies to it as well. Simply suggesting this method of payment at the point of sale can turn a cranky customer into a grateful one, saving the sale and building a better relationship going forward.

Getting Advice You Can Trust

Your credit card processor can assist you with determining whether or not a minimum purchase requirement would be beneficial for your business and where you should set the limit. If they can’t or won’t help, give us a call at 1-855-360-0360 – we’d be happy to take a look! Choosing a credit card processor you can count on every step of the way is critical to the success of your business. If you’re looking to make a change, drop us a line on our website. We’d love to show you why we’re different.
PS – American Express has a bad rap with business owners, but they don’t really deserve it. Here’s why.
PPS – Mobile payment apps are the way of the future. Get started today.


By |2018-05-31T12:43:28+00:00August 30th, 2017|Credit Card Processing|2 Comments


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