Can & Should I set a minimum charge amount?

Credit Cards Accepted With a $10 Minimum Purchase.

There are several considerations, First what is legal? Second what do your terms of service for accepting credit cards permit? Third is it a good idea?

As of 2010 the Durbin amendment allows the Fed to set a minimum credit card purchase amount – currently $10. I didn’t find a law prohibiting debit cards – however most credit card issuers prohibit it in their terms – so when you agree to accept their cards you are agreeing to abide by those terms – potentially if you were only accepting a card type that did not prohibit it you could – however you need to treat all cards, banks, customers the same so if you are accepting all major cards you would be prohibited.

So Credit cards – yes, but debit cards – no; however just because you can doesn’t mean you should. It’s generally not popular with customers, so consider the impact. You should also look at what it is actually costing you – the amount may not add up to enough to deal with an unpopular policy. Do you know percent of your purchases are under $10? Also consider that you pay a much higher rate for a $1 purchase than a $9 or $10 purchase. For example if you have many purchase under $5 you could benefit more from such a policy than if they are closer to $10 or if you have very few purchase in this range.

Here are some examples of Interchange fees for purchases of $1 and $10 showing the effective rate interchange is costing you for the sale – keep in mind you will also pay processing fees in addition to interchange and that all processors pay interchange regardless of how they structure your pricing.

  • Basic bank issued credit card $1 purchase = 5.65% in interchange
  • Basic bank issued credit card $10 purchase = 2.05% in interchange
  • UnRegulated Debit card $1 purchase = 5.55% in interchange
  • UnRegulated Debit card $10 purchase = 1.95% in interchange
  • Regulated Debit card $1 purchase = 22.05% in interchange
  • Regulated Debit card $10 purchase = 2.25% in interchange
  • Basic rewards card $1 purchase = 12.1% in interchange
  • Basic rewards card $10 purchase = 3.1% in interchange

You may find marketing to be a better solution than implementing a minimum purchase amount. For example you could sign low cost items as 3 for special price to increase the sale amount/profit margin while lowering the interchange effective rate at the same time.

Even though you can only set a minimum purchase limit for credit card purchases the reality is that many consumers won’t differentiate between debit and credit and will comply with the policy regardless of payment method, if not paying by cash or check.

Ultimately you will have to determine if the potential reduction in your processing effective rate is worth the customer reaction to the policy – for some businesses it will be worthwhile for others it may not be.