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.
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Finally, the compelling argument =) Thanks, I didn’t factor the per transaction fee...