Many of us are accustomed to pulling out that credit card whenever we make a purchase, no matter how small, to get those credit card rewards. That $4 latte in the morning—every morning—can add up, and the accompanying credit card rewards can help us get airline miles, cash back, and more. Major credit card merchants like Visa and MasterCard previously forbade merchants by contract from requiring a minimum purchase for credit card transactions and they stipulate that merchants cannot offer a discount to encourage other payment forms (like cash), but all of that is changing with the new financial reform bill.
Credit cards transactions cost merchants significantly more money than debit card transactions and it can sometimes account for one of a business’s highest overhead costs. This is especially true for the small business, and ABC News reports that small business shop owners usually end up taking a loss when they take credit cards for small ticket items such as soda and candy. When the new financial reform bill goes into effect, merchants can enforce a $10 minimum purchase limit for customers who want to use credit cards. In theory, the businesses would pass the savings back to the customer, but analysts are doubtful customers will see any difference in price.
This change does mean several important things for consumers, however. Consumers will now need to use a debit card (with a PIN) or keep at least $10 cash on them for small dollar purchases. It will also no longer be easy to obtain credit card rewards for small everyday purchases like an $8 lunch or a $4 latte. Even if you have a rewards check card, using a PIN usually voids any award you would typically receive. Additionally, by using cash or debit cards, customers will also lose out on the great protection credit cards offer for poor quality merchandise or fraud. Even though debit cards may have a Visa or MasterCard logo, if you use a PIN for a debit purchase, you don’t have the same protection as you do for a credit purchase.
What you can do:
Carry cash or expect to make a PIN-based debit card purchase for anything under $10. If possible, bundle purchases so that your total amount exceeds $10 if you want to get rewards on the purchase. Additionally, you should always be on the look-out for good rewards programs for those purchases that do qualify for credit card rewards.
For the best information on credit card rates and rewards, click here.
Comments
LeChat
July 21, 2010
Pay cash and be done with it. The merchant makes more, and you don't have to worry about a bill at the end of the month.
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inthebiz
July 21, 2010
The funny part of this is that if merchants really understood how the system works that first of all, in the agreement they signed to accept credit cards, they agreed to accept credit cards the same as cash. There can be no minimums or surcharges (exception here is what is called emerging markets). Your average joe retailer cannot charge you a surcharge or make you have a minimum purchase. If a merchant tries this, simply call your card issuer and tell them you want to file a complaint agains the merchant with who ever your card is branded with. If they charge you a surcharge,simply ask them to itemize the surcharge for you and then call your credit card or debit card issuer and chargeback the transaction. You will get the surcharge amount back at a minimum if not the entire amount of the purchase and in the process the merchant will get hit with a charge back fee anywhere from $10 to $30 dollars.
A merchant DOES NOT have to accept credit cards for payment and they pay for the convience of doing so. The majority of the BS you read is simply propoganda for legislation. Ive been in the industry for almost a decade.
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to mr inthebiz
July 22, 2010
You must be that guy that thinks he already knows everything so he doesn't need to keep up with the times. The law has been passed that Visa and Mastercard can no longer enforce their previous rules which did not allow the merchants to have a minimum purchase.
In addition, they are no longer able to tell merchants they cannot pass the costs on to the consumer.
You might want to pay attention to what's going on in the very industry you are a so called expert in. After my ten years in the biz, the most important thing I have learned is it changes almost every day.
BTW - the article writer's comment that the cost of a credit transaction is significantly higher than a debit card transaction is not always true either. Most debit networks have released their caps on transaction fee amounts and the difference in transaction fees charged can actually make the debit transaction more expensive on lower dollar tickets.
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chef/owner
July 29, 2010
Here's the interesting scenario - 6 diners come to lunch and have the usual hour. They arrive separately and wait for the last one before ordering anything except beverages. They have a nice lunch and a jolly time. Then it's time to leave. The server has already divided the bill into 6 separate checks and left one for each guest. Out come 6 credit cards for about $10 each. The server has to process the cards and return them to the guests for a signature and hopefully a gratuity. If the server is really good, this can still be a 10 minute process by the time the transactions have been closed. Usually the server gets blamed for being slow.
As LeChat said, pay cash and you can leave when you want to, you don't get a bill later and the merchant and SERVER are much happier.
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AvmanM
August 16, 2010
Hah, I would like to see merchants be able to tell the difference between credit and debit cards. I use a VISA debit card issued by Bank of America. Too many places I shop, the cashier asks "Credit or Debit?" before explaining that "we don't do debit". I am not sure what they think is the risk with debit. Until recently, if there wasn't sufficient funds in my account, the bank would, at its discretion, cover a purchase (in the hope of being able to charge me an overdraft fee). With recent changes in legislation, they are required to allow customers to choose not to have "overdraft protection" and thus not approve transactions if there is insufficient funds. Either way, there is no chance of the merchant losing money-if there isn't enough money in the bank, the transaction won't go through and they'll know straight away.
On the other hand, in spite of being my card being a debit card, too many merchants say they have a "$x minimum purchase for CREDIT cards", even in spite of my protestations that I am using a debit card. If there is no fee associated with a debit card purchase, and if merchants are supposed to require cash or PIN-based debit cards (like mine), why does so many outlets refuse to accept my card or impose minimum purchase amounts on it?
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Small Business Owner
August 18, 2010
If people realized what a business pays for processing a credit or debit card , they would be surprised. We are in a small resort town and have had people coming in and purchasing a post card or note card for 50 cents- it costs us 30cents plus percentage to process that transaction. Take that amount off of a 50 cent sale -we just lost on that sale. It does'nt matter whether it is a debit card or credit card we now pay the same processing fee for debits or credits. This year has been a year of many card transactions under $3.00. Hopefully this $10.00 minimum passes-it will help out many merchants.
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Dee
May 31, 2011
I know of a restaurant in Ohio ( Chagrin Falls )who makes their servers pay the cost of a credit card transaction!
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