How credit card rule helps your favorite mom-and-pop store

Credit card being swiped through a card reader

A couple of times a month, I grab lunch at a coffee shop around the corner from my mother's house.

Recently, I saw something new on the counter: a sign that announced the shop would begin instituting a $10 minimum for "card transactions."

Yes, this is legal, and it makes sense for this kind of small business.

The Dodd-Frank Wall Street Reform and Consumer Protection Act -- which did a number of things to bolster bank regulation in the wake of the recession -- also allowed businesses to require a $10 minimum for credit card purchases.

Merchants can set a lower minimum, but $10 is the max.

Look, I know this issue angers people, but accepting credit cards isn't cheap.

Retailers pay about 2% of the transaction, plus an additional $0.10 to $0.20 per transaction, to accept your card.

These fees are split between the credit card company and the company hired to handle credit card processing.

Even without figuring in monthly rental fees to use the credit card accepting equipment, your corner coffee shop is paying about a $0.25 fee on a $3 cup of joe if a customer buys nothing else.

That adds up.

Let's assume for this argument that the coffee shop sells 200 cups of coffee each day to credit card customers.

It pays $50 per day in fees, $350 a week, $1,500 a month and a whopping $18,200 a year -- just on $3 cups of coffee (again, assuming the customer bought nothing else).

Setting a minimum keeps them from paying fees for very small transactions.

The coffee shop does have one thing wrong: the sign warns that there's a $10 minimum on "card transactions."

The Dodd-Frank limits don't apply to debit card transactions.

So, while it can stop me from charging a coffee to my Chase Sapphire credit card, it can't if I want to pay with my debit card.

Now, retailers still pay fees when you use your debit card, but this particular law only applies to credit card transactions, so that's all they should be able to enforce.

Still, I'll pay cash when I can.

I want this great corner shop -- and others like it -- to stay in business and keep as much of its profits as possible.

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