Question: Some merchants require customers to make a minimum purchase when using a credit card. Is that legal and, if so, what is that minimum?

Answer: A coalition of retail and small-business organizations asked Congress to require a minimum purchase for credit card purchases. This was because it costs retailers money to accept credit cards and process small transaction amounts. Processing the small transaction amounts made accepting credit cards unprofitable, especially at places such as convenience stores and coffee shops. These retail organizations asked for the option to require a minimum purchase amount for credit card transactions. Congress responded, and as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Congress allowed credit card issuers to set a minimum purchase limit of not more than $10.

Q: When did the law change?

A: The law became effective July 2010, and merchants could start requesting a minimum purchase amount in September 2010. Before the law changed, merchants were prohibited from requiring a minimum purchase for use of a credit card by the credit card companies. Each credit card company agreement stated that a minimum purchase amount was not allowed.

Q: How do merchants determine how much to charge as a minimum purchase, and is there anything customers can do about it?

A: Merchants may set the minimum purchase of not more than $10 per the Dodd-Frank Wall Street Reform Act. Many local merchants set their minimum purchase at $5 to allow for small purchases. The minimum purchase amount must apply to all bank credit cards (for example: Visa, MC, Discover, American Express). If a merchant has a minimum purchase requirement of over $10, consumers have a couple of options: (1) call the 800 number on the back of the credit card to report the merchant or (2) file a complaint with the Consumer Financial Protection Bureau at www.consumerfinance.gov/.  For concerns about the minimum purchase amount, consumers may voice their concerns to Congress.

Q: I know that a merchant pays a cost when a customer uses a credit card. What type of costs are involved to the merchant, and who does the merchant pay?

A: Merchants pay interchange fees and assessment fees to the credit card companies. The interchange fee is a processing fee paid by merchants for different processing methods (swiped, keyed, e-commerce), card type (rewards, business, consumer), the type of business and a host of other variables to create a long, exhausting list of interchange fees. The assessment fee is a percentage of the volume charge. For example, while MasterCard or Visa may charge a coffee shop 2 percent to process a credit card transaction, they might have a minimum fee of 25 cents. So if a customer charges a $1 glass of iced tea, the merchant would have to pay an interchange fee of 25 cents, or 25 percent, on that transaction, making that glass of iced tea unprofitable for the merchant.

Q: Do minimum purchases pertain to debit cards as well, and if not, why?

A: Debit cards are treated differently than credit cards. This part of the law, a “debit swipe fee,” went into effect in October 2011. The new rule caps the maximum permissible swipe fee that the issuer of a debit card can charge for an electronic debit transaction at 21 cents per transaction, plus 0.05 percent of the amount of the transaction and a 1-cent addition if a bank issuing the debit card has a fraud prevention program. However, the cap applies only to large card issuers — those with $10 billion or more in assets. The debit card swipe fee cap also does not apply to credit card fees, automatic teller machine transaction fees, fees associated with government benefit cards, certain reloadable, general-use prepaid cards or prepaid store cards, or other fees charged to merchants as part of the merchant discount.