File Under: The Dodd-Frank Consumer Rape Bill
This was obviuosly snuck into the Dodd-Frank by some retail association lobbyist. It encourages you to buy more at a store than you planned, to reach the minimum.
Visa , American Express and MasterCard are now allowing merchants to set a minimum dollar amount that consumers will be able to charge to credit cards in a single transaction, reports American Banking News
Visa was the first company which allowed its merchants to set a minimum charge amount. The company’s website now states, “U.S. retailers may require a minimum purchase amount on credit card transactions. The minimum purchase amount must not exceed $10 and does not apply to transactions made with a debit card.”
American Express’s merchant manual said that the company’s merchants cannot impose any restrictions on cards that aren’t also placed on other payment methods, but a representative from the company confirmed to The Consumerist that the recent Dodd-Frank act allows merchants to set $10.00 minimums for credit card transactions, but can’t differentiate by issuers or payment networks, meaning that American Express-associates merchants can set a $10.00 minimum, despite the company’s merchant manual.
MasterCard’s merchant guide currently reads, “A Merchant must not require, or indicate that it requires, a minimum or maximum Transaction amount to accept a valid and properly presented Card.” However, the Consumerist also confirmed that MasterCard would be modifying its rules to coincide with the Dodd-Frank act in the near future to allow merchants to set a $10.00 minimum.
It was later confirmed that Discover would also be modifying its rules to allow its merchants to set a $10.00 minimum charge amount.
Merchants are financially incentivized to set higher minimum charge amounts because it encourages consumers to make larger purchases. Merchants also often pay a higher percentage of the first dollar of each transaction than subsequent dollars in the transaction, making smaller transactions less profitable than larger ones.
For example, a merchant may be charged $0.25 for the first dollar and $0.02 per dollar after that. If that merchant made 10 sales at $1.00, they would be charged $2.50 in fees. If the same company made one sale at $10.00, they would only be charged $0.41 in fees.