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.