Decoding the credit card minimum purchase law

Assorted credit cards

Merchants don’t necessarily have to accept your credit card as payment for small purchases.

This didn't used to be the case.

In the past, you could run into the convenience store and put a gallon of milk on your credit card -- unless the shopkeeper set minimums anyway, disregarding their agreement with the credit card companies.

The Dodd-Frank law changed all that.

Although its main purpose was to reform banking regulations and attempt to restore confidence in the U.S. financial system, it also gives businesses the ability to make you buy more than that gallon of milk if you want to use your credit card.

Under the law, merchants can require you spend as much as $10 if you want to use your credit card. (Store owners could set a smaller minimum, just none larger than $10.)

Incidentally, the law also allows merchants who are federal agencies or institutions of higher education to set maximum transaction amounts on credit card transactions.

There is a catch.

The law does not allow merchants to set minimum or maximum transaction limits on debit cards.

So if you want to swipe plastic to pay for a cup of coffee or a pack of gum and a merchant says "no way," use your debit card instead. You might not earn airline miles or other rewards, but you will satisfy the need for caffeine if you’re not carrying cash.

The law also gives merchants the freedom to offer incentives to consumers opting for nonplastic forms of payment, thus saving shop owners the card processing fees.

So shop owners can offer cash (or other) discounts if you sidestep swiping a credit card (or processing a payment as a credit rather than a debit) at the register.

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