I hate to dissent, but I fail to see how it matters. Running a business (manager), I know that 3% is 3%, whether it is on $10.00 or on $500.00. My family was also in business for about $100.00 years. If one’s profit margin isn’t wide enough to cover the fee at $3.00, I find it unlikely to do so at $100.00. I may just be ignorant, but I have never understood the philosophy.
In all sincerity if someone cares to explain their logic behind it, I’d be open, but I’ve never been able to figure it out.
All the dollar signs, sheesh. Our business was open for about 100 years. ::sigh::
I just said i didn’t mind, if a mom & pop business asks for a minimum of $30 in purchases to use a credit card, I don’t get my panties in a twist. If I don’t like the policy I shop elsewhere. These are usually stores I frequent often that provide good prices on their product to make it worthwhile for me to shop there. This policy helps them provide good value to their customers. I get to keep my $3.00. Why pump up your prices to lose customers to give to the cc companies?
There are a couple of reasons why merchants want a minimum purchase amount. First, most merchant accounts charge a per transaction charge as well as a percentage of charged sales. The transaction charge may be something like a quarter, and the percentage might be around 3%. On a $50 purchase, the entire charge to the merchant would then be about $1.75, or about 3.5% of the total purchase. But on a $10 purchase, the total charge is $0.50, or about 5%. And on a $5 purchase, the total charge is about $0.40, or about 8% of the purchase.
Now, a merchant can shop for an account with a very low per transaction charge, but conversely, his percentage charge of charge sales will rise the lower he gets his transaction charge.
The second reason is that with many merchant accounts, the percentage that one pays on transactions varies according to two parameters: total monthly sales volume (or perhaps a rolling average) and average sales per transaction. The merchant will receive a better rate if his average transaction is, say, $25, than if it's $12. And he doesn't lose much on the volume by getting rid of all the small purchases.
sitetest
In all sincerity if someone cares to explain their logic behind it, I’d be open, but I’ve never been able to figure it out.
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The combination of a percentage rate plus a per transaction fee can result in a considerably higher percentage rate on small transactions. If the percentage were constant it wouldn’t matter to the merchant.