Fresh after posting on whether small credit card charges are shameful or otherwise to be avoided, I got a comment on that post. “Paul” asks:
“Wasn’t a provision of the financial reform bill that passed this July that store owners are now legally allowed to not accept a credit card charge for less than $10? I’m almost sure it was.”
I hadn't gotten wind of this at all, but I dug around to try to verify Paul's claim.
Sure enough, Paul got it. Payment card networks are no longer allowed to demand that merchants accept all payments, regardless of total amount. They can only demand that merchants accept all payments not less than $10.
The bill Paul was referring to is HR 4173: Dodd-Frank Wall Street Reform and Consumer Protection Act, and was put into law on July 21st, 2010. Section 1075 of this law (beginning on page 693 of this printing of the new law) amends the Electronic Fund Transfer Act of 1978. The part that restricts payment networks as to the minimum charge they can force merchants to accept (which, up until about a month ago, was $0.01) is detailed in Section 920(b)(3)(A)(i)(II) of the amended EFT Act. Beginning with the amended section 920(b)(3) (page 698 of the new law, for those of you who are following along):
(3) LIMITATION ON RESTRICTIONS ON SETTING TRANSACTION MINIMUMS OR MAXIMUMS. (A) IN GENERAL.—A payment card network shall not,
directly or through any agent, processor, or licensed member of the network, by contract, requirement, condition, penalty, or otherwise, inhibit the ability (i) of any person to set a minimum dollar value for the acceptance by that person of credit cards, to the extent that (I) such minimum dollar value does not differentiate between issuers or between payment card networks; and (II) such minimum dollar value does not exceed $10.00 …
That is how the law is now. In the amended section 920(b)(3)(B), it further goes on to say that this amount may be increased under certain process. Meaning: There are avenues for making the allowed minimum greater, so down the road merchants could require $20, $30, or more before I can pull out my credit card.
If that was a bit hard to follow, I don't blame you. Here's a simpler way of expressing the impact of this.
Let's say a merchant has a sign next to the cash register that says “Minimum Credit Card Charge $10.” Prior to July 21st, 2010, he would be violating both Visa's and MasterCard's merchant agreement, and could face heavy fines from the issuers if he refused to accept a smaller payment, and the customer reported it. After July 21st, 2010, the merchant doesn't have to worry about a customer ratting them out, because the issuers can't demand it.
This is a game-changer, and not a good one, I'm afraid:
- It's not at all a win for consumers, even though the law is advertised in part as “consumer protection.” Ten dollars is not a particularly small amount. I can easily get lunch out for less than $10. It ultimately places restrictions on credit card use. It forces consumers to carry debit cards, or cash, for some small purchases. Payments may become more inconvenient. Do you pay $10 at the pump for the $8 worth of gas you use to fill your motorcycle, simply because the merchant isn't obligated to accept your $8 credit charge? Or do you have to walk in to pay cash? It's more costly, less convenient, or both.
- It might be a small win for businesses that are not payment networks, as they have protection against merchant account agreements that demand that the merchant accept payments so small that they are a net loss for the business. But if the merchant opts to avoid these kinds of transactions to the full extent of the law, then they could be turning away more profits than what they're saving in losses by avoiding the small credit transactions.
- It's a clear loss for payment processors. Their total transaction volume will go down, and along with it their fees.
This regulation hasn't hit the stores a whole lot yet, but it will. The law is barely a month old. As a former eBay seller, I know how much these fees can run, and it's likely not much different for brick-and-mortar stores. I'm sure store owners will take secret pleasure (and relief) in being able to turn away customers that have been abusive with small credit card transactions.
The only advice I can give is to carry around more cash for the little things so you're not caught by a nasty surprise when a store won't accept your credit card. Sorry!
(Thanks to Budgeting In The Fun Stuff for including this post in the Carnival of Personal Finance!)
This is definitely not a consumer protection. It is absolutely a protection for businesses. That being said the fees associated with credit cards is enormous. That is why you are seeing so many banks encourage debit card users to sign for transactions, instead of using your pin, because they get so much more money when you do.
This is how the high interest checking accounts work. By completing a given number of signed for debit transactions you get a higher rate of interest. All they are doing is sharing some of the revenue they generate off the fees with the consumer. No one realizes it is just a way of raising your prices to reward you with a small percentage back.
Personally, I have always carried $$ for small purchases and do also carry a debit card.
I can well understand this change. I am sure it was a compromise w/business to get the rest of the VERY important changes passed. Laws/rules cannot ONLY go one way.
This isn’t just a small win for some business – it could be huge. Consider your local independent coffee shop (I have a friend who owns one). Anytime anyone paid with a credit card for a small transaction, they may as well have not made the sale, because the shop is losing money on those transactions. This would apply to most any local retail / restaurant business.
The payment processors screwed themselves here by making the transaction fees way too high. There was too much greed and now it could all go away on the small stuff. Another example of short-term thinking screwing things up in the long run.
This will help me save money in the long run, because I won’t be using my card as often. The flip side of that is that I won’t be visiting local businesses as much. I usually only have a dollar or two in cash with me – if places won’t accept my card for my less than $10 lunch, then I will end up eating lunch at home more often.
Me too, because i only had $2.50 in cash and $4.50 on my card and the liquer store only accepts a $5 perchase from the card, i was forced to only buy two nippers saving me about $3 but having them lose out because i dint spend as much.
Hey i could have bought the $5.35 pint,but i guess they wanted less profits instead for their not being conveniant to me, but to themselves.
Let them make less lurchases if thats what they want then.
I think theres some saying that applies,
Spite my this, for the sake of that!
At the Dollar General, i used the Snap card for the food and split half of the ballance on my credit card and the other half on my debit card.
If they dont like it they can tell me no and then they can put all those things back on the self and go shove it where the Sun dont shine, unless it was baby formula of course, cannot do without that.
Hopefully store owners will be as ignorant of this ruling as we were 🙂 Otherwise more people are going to start carrying around a lot more cash.
That would make muggers more happy, right?
What is the ruling on charging a fee for purchases under a certain amount versus flat out denying them? That used to be against Visa/MC rules as well. (e.g. $0.50 fee for charges under $5.00)
While what you say is generally true, you’re also making the assumption that every store will instantly implement the $10 minimum for credit card purchases.
That’s not necessarily going to be the case. I bet that some places will still allow credit cards for any amount.
$5 min at Vickey’s liquer on route 130 in Pennsauken, thats not too bad, but still aggrivating when my two cards gets lower than $5.
But, my point is that they just denied themselves a purchase, ha ha ha ha ha.
Spit into the wind, suckers!
This is not new. I remember back in the stone age before using credit cards for daily consumer purchases was not the norm, LOTS of stores had signs with the minimum amount for charge cards (generally $10). I still sometimes balk if I don’t have cash and have to charge a small amount, feeling skeevy and sometimes asking the clerk if it is OK.
Does this apply to a check card which can be run as either a credit card or debit card? I actually went into a small business this past weekend that charged me an extra 70 cents when I used my check card because it fell under their $10 limit.
I am a small business owner. When someone wants to charge a $2.50 item, I might as well give it to them for free. And lest you think that a debit card solves the issue, let me assure you it does not. While there are different fees for debit vs credit, there is still a per transaction fee along with percentage of the sale. Come on folks, carry some cash. It is not going to hurt you, and it will help your small business owners!
Rest assured, this ‘protection’ will not save the businesses any money. The credit card companies will root out those businesses which are intent on enforcing this limit, and may pull their credit card machines out of the stores entirely. They might change over to a “minimum monthly fee” to merchants, or they may increase the per transaction charge.
From a consumer standpoint, I will assume $10 probably alienates all businesses like McDonald’s and Starbucks and other fast food, multinational corporations and the like, from their consumer base. I remember when McDonald’s made the switch to accepting credit and what a big deal it is.(I don’t want to sit behind some jerk in the line fiddling around with finding exact change for his $7.37 meal). Businesses beware, if I see that $10 minimum charge sign, I am not doing business with you. I am the consumer doing business in the marketplace, and the market is where we do business, not in some bureaucrats office in Washington, DC.
According to the Better Business Bureau minimum charges are still not allowed. Please read it for yourself before believing something on some random website. http://www.newyork.bbb.org/SitePage.aspx?site=24&id=c603d39c-a770-4aa3-9198-17b99b3e5d56
Eric: There is no date on that post. Several articles on the web make reference to that URL, and all but one is before the date the law went into effect.
The one post that makes reference to the post after the new law went into effect is incorrect, just as you are.
It would be more convenient to shop at a “corporate” store than your local mom and pop as of now. It is not worth it to go to a small business anymore and be “forced” to spend more money then you have to. Minimum charge? No thanks. I will shop at a chain and have a betting pool on when you will go out of business.
And obviously, anyone that says to carry cash lives in suburbia or in the boonies and doesn’t live in a big city. Carrying cash = risk getting mugged.
Let us see how far this “scam” turned “legal” affair goes.
The only people this helps are convenience stores that are already marking the item up 100% – and the only reason it helps them is because people will buy more stuff instead of walking away. This country doesn’t need more laws, it needs less people willing to just bend over every time someone wants to screw them out of their cash.
This law just says that credit card companies aren’t allowed to force businesses to accept small transactions as part of their terms of service. In my opinion, this is only necessary because the credit card banking field is not an open market, otherwise someone would already be servicing the small business need without a law. Just to put numbers, a typical credit card transaction on a 5 dollar purchase is about 25 cents, or 5% of the purchase value. Yet consumers complain about a 1% sales tax increase. There is no absolute “right” here, just people protecting their turf….very human.
You know whats funny, everyone complaining who doesn’t own a small business and has no idea how much it hurts charging #2.00.
This helps greatly with my business, even when markup is 100-200% on some items. They charge you a flat fee just for SWIPING the card on the machine, then a % of the sale.
Do I make more money because it forces people to spend an extra dollar or two? Yea, definatley i see it every day. But it isn’t like you aren’t getting anything out of it, you receive the products you purchased….
Asking for a $5 minimum isn’t too much to ask to support your local small business owners. That’s just how I look at it from a business owners perspective.
I’m a merchant all card perks should be charged to banks or consumers not merchants that are trying to stay in business. Credit card companies camew up with perks so why should merchants pay?
So according to the new law, I can’t walk into a convenience store and buy a coke with my debit card without spending at least 10 dollars because?? This makes absolutley no sence at all. If you don’t want my money, then why are you in business? I just experienced this a couple of days ago when I walked into a gas station and tried to buy a 16 oz bottle of coke for .99 with my debit card. The girl at the counter was going to run it until a man came running from the back yelling “no, no, no, he must spend at least $10.00!” I responded by telling him that it was debit not credit and he still refused to sell me the coke. I then became upset because I hve never heard of such a thing. I told him it was wrong and I happen to be a regular at his store and I probably will never go there again. He told me it was me who was wrong and to get out because he doesn’t need my business. I honestly don’t understand how this is healthy for businesses.
I would purposely grab a bunch of stuff from different areas of those kind of store once or twice a month and make them put it all back for saying i needed to spend over ten dollars, id have $9. And ha ha say whoops my bad a ha ha!