Debit Card Minimums: Merchant Rules and Rights
Are Minimum-Purchase Requirements Illegal?
Merchants pay fees to process credit and debit card payments, and some retailers set minimum-purchase requirements to avoid paying fees on small transactions. Fee structures often include both a flat rate for each transaction plus a percentage of the amount of the transaction. For example, if a merchant pays 10 cents per transaction plus 3% of the amount of the transaction, that would amount to a 13% fee on a $1 transaction but only a 4% fee on a $10 transaction.
The fees are legal, but merchants may be breaking the terms of their agreements with payment-processing providers when they impose minimums.
Several laws went into effect in 2013 governing how merchants deal with customers who pay with plastic. Two major changes took place.
Minimum-purchase requirements up to $10 are allowed for credit cards. Merchants can set minimums for credit card purchases as a result of a lawsuit they won against credit card companies and banks. In a case that went all the way to the Supreme Court in 2017, merchants challenged a New York state law banning surcharges and ultimately won their case.
Adding surcharges to credit card payments is allowed, as of 2020. Because merchants pay fees every time you pay with plastic, they’re allowed to pass some, or all, of that fee to you.
Credit Cards vs. Debit Cards
The law does not address debit card transactions from a consumer perspective, but it does limit how much retailers have to pay when you pay with a debit card, and the costs for accepting debit cards are typically lower than the costs for accepting a credit card, even if you use a debit card but choose a “credit” transaction at checkout.
Some debit cards are more expensive to process than others, such as debit cards issued by small institutions. Large institutions have their fees capped at 22 cents plus 0.05% of the transaction value, depending on the type of fraud protection offered.
Having said that, a merchant's agreement with card processing networks prohibits them from setting a minimum purchase amount for debit card transactions, although some retailers may not realize there's a difference between credit and debit cards, while others just choose not to follow the rules.
A Visa document intended for guiding merchants provides instructions on training staff to spot the differences between debit cards and credit cards and states clearly that minimum purchase amounts cannot be applied to transactions that are processed with a debit card.
One of the strategies merchants use to avoid paying fees when customers pay with plastic is to offer discounts for payments made with cash. For example, you might stop at a gas station that lists one price for cash or debit cards and another for credit cards. The difference typically is a few cents per gallon.
This is legal as long as the discount is offered equally to all customers. It also might be preferable for merchants from a marketing standpoint. Telling customers they get a discount for paying with cash sounds better than telling them they have to pay more to use plastic.
Reporting Debit Card Minimum-Purchase Violations
For merchants who break the rules, it’s best to let them know you think they’re doing something wrong, especially when it comes to a small business because the business owner might not be up to speed on all the laws.
Accepting plastic is almost a necessity, but it’s expensive. Although the fees for accepting a debit card are generally far lower than credit card swipe fees, there’s still a cost. Keep that in mind as you make purchases, and pay with cash or check if you can. It may help your favorite business stay afloat, and help keep prices down for everybody.
If you believe that a business is blatantly ignoring the rules, Visa and MasterCard provide forms you can use to report the vendor to the card processing networks.
Since merchants are not breaking any laws by setting minimum-purchase amounts for debit cards, there’s no reason to report them to your state’s attorney general or the Federal Trade Commission. Merchants can set whatever policies they want as long as they do not break federal or local laws.