Little noticed passage in law gives federal blessing to those handwritten signs
By Dana Dratch
You step up to the counter with a couple of small items and your credit card.
Then you see the sign, often handwritten and taped to the register: "$10 minimum for credit card transactions."
It's a familiar scene to consumers, especially those who frequent mom-and-pop stores. There's just one difference now: It's a practice sanctioned by law.
Until 2010, most card networks prohibited merchants from setting minimums for credit card transactions, and even set up methods for consumers to turn in violators. The card issuers want cards to be universally accepted like cash, and minimum purchase requirements made them less, well, cashlike.
A coalition of retail and small business organizations asked Congress to change that. Because it costs retailers money to accept cards, small transaction amounts can make accepting cards unprofitable, especially at places such as convenience stores and gas stations, where profit margins are paper-thin. They asked for the option to require a minimum purchase amount for credit card transactions.
They got it. The request received little notice because it was tucked into a bill that became an 848-page legislative behemoth -- the Dodd-Frank Wall Street Reform and Consumer Protection Act. As fierce debates took place over whether the legislation created
or preserved "too big to fail" banks, and whether to set a cap on debit card interchange fees, the short section on credit card minimum payments survived, there on page 698.
It went into law in July 2010, and all those handwritten signs went from forbidden to federally blessed.
New rules: up to $10 minimum OK
The law says that merchants can set a credit card minimum purchase of up to $10, as long as they treat all cards the same. It also allows the Federal Reserve to review and increase the minimum payment amount.
"I'm very sympathetic to the business owners and try not to pay with a credit card," says Norman Scarborough, professor of entrepreneurship at Presbyterian College in Clinton, S.C. and author of "Essentials of Entrepreneurship and Small Business Management."
"Cash customers are basically subsidizing transactions for credit card customers," he says.
'You'll need to buy something else'
On the other hand, minimums can also make it inconvenient for cashless shoppers, who'll have to buy more than they intended.
"From a consumer impact, I hate it," says Linda Sherry, director of national priorities for Consumer Action, a San Francisco-based national consumer education and advocacy group. But unless it becomes widespread, there probably won't be much in the way of consumer ire, she adds.