What is the purpose of requiring a minimum purchase for credit card sales?

to pay for the shipping and handling of products

The same reason some pizza places have a minimum order for deliveries. They need to be able to justify paying someone to drive all the way to your house.

I’m going to assume you aren’t talking about deliveries. If you walk into a convenience store and buy a candy bar for 89c and pay with your card they still have to pay the transaction fee. Some small places can pay up to 50 cents every time they run your card. So they are only getting 39 cents for your candy bar and they probably lost money selling it to you. The little stores by my house charge 50 cents if your order is less than 5 bucks. You can always pay with cash.

Visa makes a lot of money and all they do is run the network the machines work on.

The reason they do it is exactly as @johnpowell says… to make up for the transaction fees. I’m not certain if this is true, but I have heard that the big credit card companies don’t allow stores to do that anymore. If they find out about it, the store can lose their contract with Visa / Mastercard and will no longer be allowed to accept credit card payments at all.

Yes, it’s to make their credit card transaction fees worth the sale. It’s usually only small shops and companies who do this, that i know of, and i hardly ever come accross them.

Depending upon the bank and low long they had the account, stores owners have to pay a minimum transaction fee or a percentage of the sale whichever is greater. I always carry cash with me. If I go to a small store or restaurant, I pay cash. The owner gets to keep the 5% transaction fee that would go to the bank. I lose 1% cash back but it’s worth it to me to help the little guy.
Whenever I make a large purchase, I ask: “Do you give a discount for cash?” You’d be surprised how many places do.

Fixed transaction fees imposed by the banks. A smaller charge would have a greater % taken out by fees, possibly to the point that the product/service is no longer profitable. Most places in the UK will not accept card payment for any transaction less than £5 so cash is still essential.

If you are truly annoyed by the minimum purchase requirements, you could go ahead and report them to the credit card company. Both Mastercard and Visa forbid this practice. Most small businesses do it anyway because people who use credit cards on transactions under $10 or so actually end up costing them money on the transaction, rather than them making a profit.

http://www.corporate.visa.com/ut/faq.jsp#5
http://www.mastercard.com/us/business/en/common/faq.html#211

It’s up to you whether that practice is so annoying that you want to get the small business into trouble and make life even harder for them.

In the agreement for credit cards stores are not to charge a fee to the customer, I’d bet this is a way around that. Stores pay a percentage of the sale to the CC company and to the bank in process fees, it can be expensive for small businesses. I would guess that CC companies would close this loophole too. They do not want anyone to stop using cards.
As a small business owner I can tell you it is very expensive to pay all the fees to be able to compete with larger businesses especially since peple are in a hurry and shop all their needs in one store and do not necessarily appreciate the service and convenience of small stores any more.
So you can report it or just make a bigger purchase or go elsewhere. Bad deal for mom and pop stores. Nice of @worriedguy to pay cash for the two reasons he mentioned: ” I always carry cash with me. If I go to a small store or restaurant, I pay cash. The owner gets to keep the 5% transaction fee that would go to the bank. I lose 1% cash back but it’s worth it to me to help the little guy. Whenever I make a large purchase, I ask: “Do you give a discount for cash?” You’d be surprised how many places do.”

@MaryW “In the agreement for credit cards stores are not to charge a fee to the customer, I’d bet this is a way around that”

Yeah, but in that same agreement, they’re not allowed to impose a minimum purchase either. It’s not a question of breaking the agreement that concerns them, it’s what consumers are likely to put up with. Consumers will balk at a business that says they have to pay more money for using their credit card. Consumers will not, in general, care if they have to buy a minimum amount, since they’re likely buying more than that anyway.

@Steve_A In Australia the minimum purchase is $5.00, but I have seen a change to a minimum purchase of $10.00. At the checkout this is clearly shown so no-one can ever say they didn’t know about the minimum purchase for credit card sales. By law businesses are now permitted to pass their credit card fee on to the customer as an extra charge at the time of purchase. These credit card fees are from about 1% to 3% of the total bill.

I’m just now looking into putting a card machine in my little shop and the cost of just leasing the thing is HORRENDOUS!, and I KNOW that there is not any way at all I could charge on the credit card or bank card fees to the customers here in Norway. It’s just not done. Nor does anyone here put minimums on charges. It’s just a cost of doing business here. But that maybe part of the reason why EVERYTHING here is more expensive. Banks…. Credit Card companies…. they sort of have us over a barrel and they know it.

@cazzie You might want to shop around for a better rate (we’ve noticed some credit card transaction processing companies have been much more reasonable than others). For example, there are iPhone apps out there now that let you do credit card order processing.

@gorillapaws that is exactly what I’m doing here. People flash their card and look for a terminal and I don’t have one…. I’ve lost sales, but I’m having a hard time justifying the 700+kroner a month with the regular 3%-5% fees taken on each transaction. No body is going to use an iPhone app on my phone to pay their bill….. they’ll think it’s a trick of some sort.

There are tech biz that are independent of the individual banks so I’m hoping they’ll be cheaper.

@cazzie Apple uses them now to check-out customers. It has a swiper and everything. You sign on the screen with a special pen.

I think if you played it up like it was high-tech and somehow made you guys better/more hip it might work. Although I haven’t looked into the rates they charge, and i’m not sure if they would support business in Norway. I guess the bigger point is, as you said you’re doing, to look around and try to find the best deal—I was just encouraging you to think “outside-the-box” a bit.

@gorillapaws I’ve used them in Apple Stores. I trust them because it’s Apple. It’s a ginormous corporation, and they’re using their own product to do it. There is no way in hell I would trust a small business or mom and pop store with it. If someone there ever told me to swipe my card on their iPhone, I’d laugh in their face and walk away.

@gorillapaws Our Tele-network here has just begun supporting iphones, I doubt our banks would approve of checkout systems designed by them. I was thinking about having my laptop online and asking if they had internet banking instead and could just ‘billpay’ into my account. It would be almost free then. But then they’d have to use passcodes and stuff and that wouldn’t work either….

Like I said, the credit card companies and banks have us over a barrel as retailers. I can understand if businesses want to limit the number of transactions and % loss to these companies. It wouldn’t fly here in Norway in a specialist store, like I have.