NOW... if they have it all set up to automatically send the charge on to your issuer, then maybe we have somehing here...
You stop at the neighborhood grocery store on the way home from work to pick up some milk, fresh spinach, tomatoes and a chunk of Parmesan cheese. The tab comes to $11.24; you've only got $10.No problem. You whip out the credit card and hand it to the cashier.
He points to the small sign taped to the side of the register that says, "Credit card purchases -- $15 minimum." Great. Now you either have to drop an item or buy more than you want so you can use the card.
Did you know that retailers aren't allowed to set a minimum purchase amount for Visa or MasterCard? It's not illegal -- it's just not allowed in their contracts with the card companies.
"As long as it's not a widespread problem, I don't think you'll see a lot of enforcement," says Scott Strumello of Auriemma Consulting Group in Westbury, N.Y.
But it does seem widespread.
No bubble-gum purchases Most people have at least seen those little signs that say you have to spend $10 or $15 or maybe even $25 if you want to use a credit card.
Auriemma Consulting surveyed 500 consumers and found that 17 percent had been told they needed to purchase a minimum amount, says Strumello.
"You're most likely to see minimums in a small independent retailer," says Strumello. "You won't see it in a major retailer. In independently owned shops where cost is a more significant factor, a merchant is counting every penny and transaction costs add up."
A Juno Beach, Fla., store owner, who wishes to remain anonymous, says the transaction costs for accepting credit cards are "totally unfair" to small retailers. "At the end of the year, it could cost a small business $2,000, depending on how much volume you do."
The costs to merchants John Mayleben, vice president of sales and marketing at the Michigan Retailers Association, which processes credit card transactions for store owners, says there are two main fee components when merchants accept credit cards.
"The interchange fee is usually expressed as a percentage: maybe 2 percent. If you have a $2 item or a $2,000 item, that 2 percent is the same. Most credit cards also have a transaction fee: maybe 10 cents per transaction. Obviously, if you're selling $2 items that fee is a lot bigger than if you're selling $2,000 items."
The bank that issues the retailer a credit card account usually charges the transaction fee. It's another slice of the pie the retailer has to give up for accepting a card, which is why they say it's not worth it to let customers charge a buck or two.
"We have people come in here and want to use a credit card for a glass of juice," says our anonymous retailer.
"In reality, it's a violation of the contract," says Mayleben. "But there are a lot bigger fish to fry than (a small store) on the corner. If the folks from Visa or MasterCard were to knock on his door he'd be told to stop or lose his ability to accept cards."
Mayleben says the fees aren't unreasonable.
"The merchant designs a profit margin into their product to cover that fee. The Post Office did a white paper before putting credit cards into their system so you could use them to buy stamps. They calculated the cost of handling cash and checks, and it was similar to handling credit cards."
You probably shouldn't be seeing too many places pushing minimums for American Express or Discover cards, either. According to Strumello, those two cards allow minimums, but only if minimums are applied to all cards the retailer accepts. In theory then, any place that accepts MasterCard or Visa wouldn't be allowed to set a minimum for American Express or Discover.
Minding the minimum Visa says its bylaws clearly state that merchants must not establish a minimum transaction amount. That's done, "To protect Visa cardholders so they can expect to use their cards anywhere, anyhow and anytime Visa is accepted," says a spokesman.
"If Visa finds out about a violation, Visa will issue an enforcement letter to the acquiring bank that enables the merchant to accept the card. It's up to the acquirer as to how to deal with the merchant."
MasterCard is also emphatic about dealing with violations although MasterCard deals with them directly.
What you do the next time you're told there's a minimum to use a credit card probably depends on how you feel about the issue. If you're sympathetic toward the merchant's plight you'll save the card for bigger purchases.
On the other hand, if you're trying to rack up every cent on your credit card for more frequent flier miles, you might rustle up your best steely-eyed gaze and say, "That's not allowed."
If you'd rather complain with less fanfare, write to Visa at askvisa@visa.com. MasterCard complaints will be accepted at 1-800-300-3069.-- Posted: April 18, 2001.
I'm fairly certain that another transaction fee is charged for credits as well, so if they contact you claiming a minimum amount, just have them credit the .03 back to your account, then report them to visa and/or mastercard for applying a minimum. That should really rock their world.