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Can Merchants Require a Minimum Purchase for Debit Cards?


You’re short on cash, you don’t want to stop at an ATM, and you’re right by the store so you dash in and use your debit card for a $5 purchase. The cashier tells you they don’t take debit cards for transactions of less than $10. You’re ticked, walk away and wondering whether what just happened is legal or not?

That’s just one more question in the debit vs. credit card world. While merchants can set a limit of $10 for credit card purchases, there is nothing in the law about limits for debit card purchases.

The 2010 Durbin Amendment to the Dodd-Frank act included a provision that minimum purchase prices on credit cards must be allowed, and capped the minimum at $10. It did not stipulate that debit cards can be subject to minimum purchases, and the card brands chose to prohibit it. “So, a merchant that charges a minimum on debit is not breaking a law, but they are breaching their merchant agreement with the card brands,” says Ellen Cunningham, marketing manager for CardFellow.com.

So, the bottom line, says attorney Matt Pinsker of Pinsker Law, “While it may be inconvenient to customers, it is perfectly legal for businesses to have a minimum. Businesses do not have to even offer debit cards as a payment option, and if they do choose to accept them, they can put their own terms and conditions on them.”

While it may be inconvenient to customers, it is perfectly legal for businesses to have a minimum.

-Matt Pinsker of Pinsker Law

While debit cards can be a savings to businesses in not having to take the time to handle and count cash, there is a cost to businesses for taking payment by card, which can be either a fixed rate per transaction or a percentage. “With small transactions, it can really eat into a business’s profits, especially when it is a fixed rate,” says Pinsker.

Jeff White, an analyst and staff writer for Fit Small Business, specializing in small business finance, says, “There are no laws allowing it and there are no laws banning it. It's kind of a grey area, which is why there is so much uncertainty surrounding it. If the merchant requires a minimum amount on debit cards, then they're likely breaking their own agreement with the credit card companies processing your debit card transaction. The debit card fees are capped by Dodd-Frank at $0.21 per transaction, so minimum purchase amounts weren't given where they were for the use of credit cards.”

Banker Corey Vandenberg, further explains, “The merchants are offended if you buy a dollar or less item from them using a debit or credit card since it costs them around 25 cents just for the transaction, or in other words, they have just paid VISA for the privilege of waiting on you, they could have technically lost money. Often you will see a sign at the merchant (usually handwritten) where their minimum charge is $5 or $10 because that’s where they consider it “worth it” to accept a debit or credit card. The sellers of merchant services warn the merchants not to do that, but there is simply no VISA police to force the issue. In the end, the merchants are simply passing these costs onto consumers, one way or the other.”

If the merchant requires a minimum amount on debit cards, then they're likely breaking their own agreement with the credit card companies processing your debit card transaction.

-Jeff White, analyst and staff writer for Fit Small Business

What recourse do you have? Cunningham says, “If you’re denied using a debit card for purchases under $10, the best thing to do is try talking to the business owner or manager - rules and laws change regularly, and the business may simply be misinformed. Be sure to speak with an upper-level staff member, as a cashier is likely just following their training.”

You can go further. You can report them to Visa, MasterCard, or whatever processor the merchant is using. Visa's report form is here. Mastercard's is here. Says White, “It won't help you be able to use the card though. Your recourse options generally depend on what state you're in, because many states allow merchants to refuse service to anyone for any reason at any time. In any case you won't personally benefit from anything you can do as recourse, but you could get the merchant in trouble.”

Editor's Note: Many DA readers with reward checking accounts have a reason to care about merchant debit card rules that can make it more difficult to meet the monthly requirements of reward checking accounts.

ForkedTail   |     |   Comment #1
There are a couple of errors in the article.

First, the cap on the debit card interchange is $.22 plus 0.05% of the transaction amount. But that only applies to "regulated" or "non-exempt" cards. Regulated cards are those issued by financial institutions with more than $10 billion in assets. Debit cards issued by your typical credit union or by the typical small bank with a rewards checking account are not subject to this cap.

Second, this is a cap on the interchange fee. The term "interchange fee" is frequently misused. It is NOT the fee that the merchant pays. It is the fee that the merchant's bank pays to the bank that issued the card. Since the merchant's bank is in business to make a profit, they charge the merchant much more than the interchange fee. There is no cap on what the merchant's fee (referred to as the "merchant discount") can be.
anonymously   |     |   Comment #2
It's informative that the DA members correct the so-called experts when the are wrong!
Martin   |     |   Comment #4
You missed to add that the big stores pay only fraction of $.22 and the plus 0.05% may not apply to a huge volume business, lets say Walmart (they pay only one half of one percent of the total), but the mom and pop establishments can be forced to pay 4, 5 or 6% of the total purchase price, interchange fee affects only a small amount of purchases.
"Just Sayin'   |     |   Comment #3
The article quotes a person who says the interchange fee is 21 cents. That is not quite correct, but it is close. However, the correction given by Forked Tail is also not correct, but close. The interchange fee is actually 21 cents plus 0.05 percent multiplied by the value of the transaction, plus,if ELIGIBLE, a one cent fraud prevention adjustment. By the way, I have stopped counting how many times information in the WSJ, Forbes, etc. have been incorrect or incomplete. That does not usually take away from the overall value of the information given. I think the same can be said for this article and others provided by the "so-called" experts.
RJM   |     |   Comment #5
I'm still doing my 34 debit card transactions per month at about 3 different quick mart gas pumps.

But, probably need to stop with 24 of them. Just not worth it with regular non-hoops rates higher.
Timothy   |     |   Comment #6
34 debit transactions per month at 3 different gas pumps? When do you have time to actually enjoy your money? I like to get higher rates and I guess we all have our limits as to how far we will go to get them, but 34 debit card transactions in one month? Yikes.
Martin   |     |   Comment #7
I did some calculations about the reward cards and time spent to fulfill the requirements, my conclusion, not worth it.
Let say you get 5% on $15K, now start deducting for loosing at least 2-3% not being invested in CDs, spending your time to drive around town, spend on gas, spend on cost of merchandises, expose yourself to debit card loses if you lose the card or is being copied from the swipe machines by the crooks and then you face the tax liabilities and logging Online to see your purchases if you did enough. I'm sure there are other negatives associated with reward cards, but I did stopped long time ago to work for the banks or CUs pockets.
RJM   |     |   Comment #10
Tim & Martin,

I had a long post demonstrating exactly how much I was making by doing the 3rd reward checking for just a .005% differential and it came out to at least $30 an hour. Likely more but I was being extra conservative. The post was lost in cyberspace when my laptop had a brainfart or something. Ive never made a special trip. And, I did drop one of the accounts this month. So I'm down to 22. And that is easy to do with very little time when I'm already out.

Ive read about people who had 15 or more accounts and do them all online, $1 at a time. That's more than I will do .

But, I'm retired and I need hobbies. I started Disc Golf about 5-6 weeks ago and its fun and Ive lost about 15 pounds of my early retirement around my waste. And until the last week or so for various reasons, I was pretty consistent about playing for 45-60 minutes a day. I'm not good but I'm better than when I started and the important thing is, I stuck with it, something I was never able to do with normal walking. (Beyond a week or two for even 30 minutes)

One of the parks I went do had 12 rounds and I tried it, liked It and hope to continue.

PS, its spelled "losing". "Loosing" is a pet peeve of mine. Amazing how many otherwise intelligent people misspell it.
GARRYOWEN4EVR   |     |   Comment #9
CHIEFBLUEFOX   |     |   Comment #12
i would rather take stock tips from wall street cabbies than financial advice from anonymous CLOWNS in some net CHAT ROOM OR FORUM SCROLL THREAD.
Nothing   |     |   Comment #13
If you give a tip you get a tip!

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