If you’re running a business, you may have wondered whether it’s legal to set a minimum purchase amount for card transactions. The short answer would be “sometimes.” The long answer: it depends on the type of card in question.
For debit cards, setting a minimum charge on purchases isn’t acceptable. For credit card purchases, you can set a minimum charge as long as you follow the stipulations provided in your processing agreement with Visa, Discover, and MasterCard. Here’s why this is possible and which rules for imposing purchase requirements you should watch out for.
The Current Regulations
As long as you uphold the card brands’ requirements, you’re allowed to set a minimum purchase amount on any credit card purchases. However, keep in mind that American Express has traditionally been silent on the issue of minimums. It’s generally preferred to apply terms set forth by Visa, Discover, and MasterCard to those of American Express.
When it comes to the finer details on minimum charge restrictions, there are three rules you need to follow:
1. The Minimum Purchase Amount
As it stands right now, the cap for credit card minimums is set at $10. Visa, Discover, and MasterCard all reference the $10 cap in their documentation and specify that debit cards are exempt from this rule. That said, the Federal Reserve has the power to adjust this amount at any time.
2. No Differentiation Among Card Brands
If you opt to set a minimum charge, you can’t change those amounts depending on the card brand you’re dealing with. Your minimum must apply to Visa, Discover, and MasterCard equally.
3. No Differentiation Among Card-Issuing Banks
On a similar note, you can’t impose a minimum purchase amount on cards issued by a specific bank. For instance, if you’re not imposing a minimum on cards issued by Bank of America, you can’t impose a minimum on cards issued by CitiBank.
Why Minimum Charges Exist
Long-time business owners may recall that card brands didn’t always allow minimum charge amounts on credit card transactions. This changed in 2010, when Senator Richard J. Durbin proposed an amendment to restrict interchange fees imposed upon merchants by debit card issuers.
The Durbin Amendment also gave the Federal Reserve power to regulate minimum amounts for credit card purchases. As mentioned above, the current limit is $10 or less. The portion of the Amendment pertaining to this issue directly prohibits payment card networks from inhibiting the ability of any person to set transaction minimums or maximums.