Want to Pay by Credit Card? Minimum Purchase $10

If you have seen a sign like this at a retail store, you are not alone.  No matter what the sign says, if a merchant accepts credit or debit cards, you are allowed to use any card they accept for a purchase of any amount.  Merchants cannot, in any case, impose minimum or maximum purchase amounts for card payments.  Those who try to pull this off think they are being smart by avoiding merchant fees on small dollar items that may already have a thin profit margin.  What they don’t realize (or they do and think the customer will be naïve) is that they are in violation of card association operating guidelines.  They can also anger customers who must purchase more in order to pay by card.

Even if a merchant accepts all the card types, they must follow the strictest operating guideline.  In most cases, that will be Visa.  (Merchants can choose what card types to accept. For example, Costco only accepts Amex and debit cards.  However, Visa and MasterCard are grouped together in most cases.)  Violation of the minimum or maximum purchase guideline can get a merchant terminated by Visa or MasterCard (who own the dominant share of the card payment market).

Terminated merchants are put on the Terminated Merchant File list – called TMF or MATCH.  Merchants can land on the MATCH file as a result of violating the terms of their credit card agreements with either Visa or MasterCard.  Once a merchant is on the MATCH file, it is very hard to be removed.  It is considered a blacklist in the card processing industry. Click for more information on the MATCH file.

Interestingly enough, some states (i.e. New York) allow this practice so long as a sign is clearly posted.  No matter, since the merchant needs to understand that they must abide by the respective card company operating guidelines.  If they violate the rules, they are terminated.  Visa and MasterCard, not the legal system in this case, rule the roost.

Merchant fees, on average, run about 2% of the sale and include items such as, but not limited to, discount and/or transaction fees, card association fees, statement fees, AVS (address verification), gateway fees and monthly statement fees.  Merchants need to accept these fees as a cost of doing business, similar to other operating fees.  Instead of focusing on the cost of accepting card payments, merchants should concentrate on the reduced risk of card payments, which are guaranteed at the time of purchase.  (Exceptions to this payment guarantee would be if chargebacks come in to play at a later date.)  In a time when cash or checks were the only option and consumers felt more comfortable paying by check, a merchant had to wait until the check cleared – and also took the risk not getting paid if a check bounced. The funds from debit and credit card purchases are deposited anywhere from 24 – 72 hours from the batch closing date.

Business owners are constantly finding ways to help their profit margin – by using effective practices to reduce merchant fees and increasing customer loyalty.  Some have their POS systems set to default to PIN debit (merchant fees for debit cards are typically lower than those for credit cards).  Others offer discounts for cash payments.  No matter how a merchant chooses to operate in favor of their bottom line, they have to ensure that they are adhering to card association operating guidelines.  In today’s world, a merchant not being able to accept card payments will have a hard time existing at all.

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