Setting Minimum Amounts On Card Transactions

Setting Minimum Amounts On Card Transactions


Minimum amount card transactions are a way for merchants to avoid paying processing fees on small credit card transactions. But it's essential to adhere to the legal and contractual limitations before implementing a minimum purchase amount.

In 2010, the rules surrounding minimum credit card charges setting a minimum credit card charges changed. Prior to 2010, these guidelines were overseen by the processing agreements set by Visa and Mastercard. The large credit card companies prohibited the setting of minimum purchase transactions because that practice limited their profit margins.

The Durbin Amendment which was passed in the wake of the 2008 recession and financial markets crash overruled the credit card companies' ban on minimum charge transactions. This merchant friendly ruling allows business owners to establish minimum purchase rules for card transactions, ensuring that they- and not the big credit card companies-can preserve their bottom lines.

Can You Implement Minimum Amount Card Transactions on Credit Card Purchases?

As a merchant, you can set minimum amount card transactions as long as the amount does not exceed $10. You're allowed to set a lower requirement but cannot place a limit above the $10 amount. Visa, Mastercard, and Discover list several rules on setting minimum charges in their processing agreements. The key takeaway is that your minimum charge requirements are consistent across the board.

You may not set a minimum purchase for one issuing bank, and not another. This means that you cannot set one standard for Visa and another for Mastercard. American Express doesn't mention minimum purchase requirements in their agreements, but it's a good idea to apply the same requirement for Amex purchases as you do for any other card.

Can You Implement Minimum Amount Card Transactions on Debit Card Purchases?

In short, the answer is no. The Durbin Amendment prevents merchants from establishing minimum charge transactions for customers paying with their debit cards. There are strict limits in place regulating the interchange fees and PIN debit network fees that banks charge for these fees.

That said, Durbin does not prevent credit card associations from imposing minimum charge restrictions the way it does with credit card purchases. With that in mind, be aware that new limits on debit card processing fees cut deeply into the card networks' revenue.

The Durbin Amendment ensures that debit card transaction fees stay low. This has been popular and gone unchallenged because debit card transactions are considered by card processing companies and banks to be very low risk. This is good news for merchants. Customers prefer to use debit over cash for small transactions, so you can be confident that these low-ticket transactions will not cost you a lot in processing fees.

Will My Credit Card Processor Treat Debit Cards as Credit?

Depending on how a transaction is verified at the point of sale and depending on your processing pricing model, debit cards could be treated as credit.

For example, merchants who are on a flat-rate pricing plan will be charged the same rate for both credit and debit cards. While the flat-pricing model makes your costs more predictable each month, it also means you're paying more for debit card transactions. If you are in a tiered pricing agreement, your processor may choose to silo debit and credit card transactions and not distinguish between the two.

How Secure are Debit Card Transactions?

There are two different ways that debit card transactions can be verified: PIN or signature.

With PIN debit transactions, the customer will have to enter a secure PIN number in order to complete the payment. Their unique code is routed through a PIN debit network which is similar to, but different than, the network used for credit card transactions. The processing fees for PIN debit transactions reflect the low risk associated with their use.

Unlike PIN debit transactions which are routed through their own network, signature debit transactions are routed through credit card processing networks.  Once the customer signs the receipt, the transaction is routed and verified via the usual network, and the correlating interchange fees will be applied.

As usual in the world of credit card processing, there is no simple answer about minimum amount card transactions. If you have questions about minimum amount card transactions, the experts at Sekure are here to help.

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