MasterCard and Discover Card Brands Revise Minimum Transaction Amount Rules. Effective immediately, MasterCard and Discover announced a revision to their rules permitting Merchants the ability to set a minimum transaction amount of up to $10 on a Card Sale or Cash Advance when the purchase is made with a Credit Card (a card account that accesses a credit account) and does not differentiate between issuers or other card acceptance brands. Setting a minimum transaction amount limit for debit cards (Pin Debit or Signature Debit) is still prohibited.
See related article Visa, MasterCard minimum transaction limit changes which highlights how this rule came about from the Durbin Amendment, passed and signed into law, July 2010.
Visa and MasterCard merchant card acceptance policies state that merchants cannot set a minimum for accepting credit cards on a transaction. If you accept the card, you must accept for all transactions. This has not stopped businesses, especially restaurants and quick stop stores from posting signs with $10 minimum charge. The repercussion for merchants can be fines and removal of card acceptance privileges. Additionally there are state laws that address this issue and conflict with the card association regulations.
Why do merchants want to set a minimum fee? The problem is the high cost of credit and debit card processing relative to their profit margins. For example, a typical sale costs the merchant a percentage rate and a per item fee. If 2% plus $.20 per item, that’s the equivalent of 4% fee for accepting a card for payment.
The 2010 Durbin amendment specifically addresses this issue in this section:
- Setting of maximum/minimum transaction thresholds for use of a credit card
The Senate-passed amendment provided that card networks could not prevent merchants from setting a minimum or maximum dollar amount for payment by credit card.
The compromise provides that such a minimum may not exceed $10, with authority given to the Fed to increase that dollar amount. The compromise also limits the ability to set maximums for payment by credit card to the Federal government and colleges and universities. The compromise further clarifies the Senate language and establishes that a minimum payment not exceed $10 matching laws currently on the books in a number of states.
It’s important to note that the Durbin Amendment is still a work in progress that will give the Federal Reserve new powers. Not everyone thinks this is a great idea, as we published in the article