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Card Associations Prohibit Minimum Card Purchases

The days of merchants requiring minimum purchase amounts when customers use credit cards could be drawing to a close. Factors contributing to the demise of the minimum purchase include new payment technologies that speed up transaction times, new markets that now accept payment cards for purchases, and the card Associations lowering levels and lessening restrictions for transaction requirements.

"The Washington Post" reported in February 2005 that Visa International, MasterCard International and other card companies are doing their best to make sure that retailers and businesses will accept plastic cards for purchases that were once eligible only for cash.

It's been a common business practice for years: Customers could not charge small purchase amounts because of the transaction fees that merchants paid to credit card companies and processors. It wasn't cost effective, for example, for merchants to spend $0.55 in fees on a $2.25 transaction.

Now, with more markets taking electronic payments for small purchase amounts, including QSRs, Internet sites for downloading music or ring tones, parking meters and vending machines, credit and debit card purchases under $5 totaled $13.5 billion in 2004.

And with so many people carrying cards instead of cash these days, in order to encourage merchants to accept the cards for smaller-value purchases, Visa eliminated its requirement for signatures on receipts for purchases of $15 or less in 2003 and lowered the merchant fees it charges. Contactless payment solutions, which speed transaction times and add convenience for consumers, are another contributing factor. An increasing number of QSRs and drug and convenience stores, where transaction values are typically not high, have implemented the systems.

By some estimates, consumers spend $1.32 trillion in cash on purchases under $5 each year; until now, this has been an untapped revenue source for credit card companies. As the companies pressure merchants into accepting their credit and debit card products for transactions of all sizes, they might face an uphill battle convincing merchants of the benefits when all customers pay with plastic.

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