Should You Set a Minimum Purchase Amount for Your Store?

Before you set a minimum purchase amount for your store, there are several important factors you need to consider. Learn about all the pros and cons.

These days, more and more consumers are ditching cash and using credit cards even for small purchases. As a business owner, you may find yourself losing out due to the transaction fees. When you’re working on razor-thin margins – as many small businesses are – every cent counts. 

Setting a minimum purchase amount can save you from absorbing these fees for small amounts. However, while this may sound appealing, it could also deter potential customers. 

Let’s take a closer look at how minimum purchase amounts work. I’ll share some expert tips from my own experience to help you decide whether setting a minimum purchase amount is right for your business.

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What Is a Minimum Purchase Amount?

A minimum purchase amount is the smallest transaction a customer can complete using a credit card at a certain business. Minimum purchase amounts are very common among small businesses, and they can be a great tool you can use to save some money. 

The amount itself is set by you, as the merchant, in order to minimize the impact from credit card interchange fees, while still providing value to customers. 

Is It Legal to Set a Minimum Purchase Amount?

Generally speaking, it is legal to set minimum purchase amounts for credit cards, but with some restrictions. In the US, over a decade ago, merchants were not allowed to set credit card limits, as dictated by three of the major credit card companies – Discover, Mastercard, and Visa. It was seen as an inconvenience to consumers, so the card companies restricted minimum amounts. 

That changed with the passage of the Dodds Frank Wall Street Reform and Consumer Protection Act. This act established the legal authority for merchants to set a minimum credit card limit, capped at a $10 minimum. The law also stipulated that merchants must treat all card types the same by using the same minimum across the board. 

However, it’s important to note that you can only set minimums for credit cards, but not for debit cards, despite the fact that many of these also incur processing fees. Unfortunately, this can get confusing when many debit card users run their cards as credit cards. 

If you deal with in-person transactions, it’s essential to be able to correctly identify card types, so as not to impose minimums on debits or process them incorrectly. Click here to read more about debit card processing fees. 

Minimum Purchase Amount Pros and Cons

Pros:

  • Imposing a minimum will help alleviate the financial toll that processing fees take on small purchases, which in turn can help increase your margins. 
  • You are able to choose the minimum amount and change it as needed, which offers flexibility in finding the right amount for your business. 
  • It can lead to upselling other products to customers who want to meet the minimum, which can increase average transaction size.
  • Larger purchases that boost revenue will not qualify and customers seeking these types of purchases will be unaffected. 

Cons:

  • Customers may be dissuaded from purchasing from you and seek out alternatives, instead of continuing with their purchase.
  • If your business mainly sells higher-priced products, a minimum purchase amount may not be useful. 
  • You may have to offer alternative payment options such as ACH (Automated Clearing House) transfers or cash, which come with additional considerations and possibly fees.
  • Finding the right minimum amount can be a challenge, as too high will deter more customers, but too low will have little effect on your margins. 

How Should You Calculate the Right Minimum Purchase Amount?

To determine the right minimum purchase amount, you have to understand your sales margins and how implementing a minimum may impact them. To find the right balance of maintaining customers while still benefiting your finances, set the lowest possible minimum for your business. It may take some time to figure out a happy medium.

Figuring out your average purchase value can help you calculate the best minimum purchase amount to impose. 

For instance, if you run a neighborhood convenience store filled with low-cost snacks and drinks, you may only have an average purchase amount of only $3 or $4. In that case, you may only want to set a $2 or $3 limit, or you may determine that it will hurt business more than it will help and avoid it altogether. 

On the other hand, if you have an average purchase amount of $10 and you sell a range of products at different price points, it may be worth setting the minimum above the lowest-priced items, as it may only affect a few customers. 

What Else Can You Do to Save on Credit Card Processing Costs? 

While setting a minimum purchase amount can be great for certain businesses, it may not work for yours. However, there are plenty of other ways you can save on credit card processing fees for your business. 

Accept a Variety of Payment Methods 

If you’re imposing a minimum credit card amount, it’s vital to have alternative payment methods available for customers. If a customer knows about the minimum for credit cards but can choose to pay a different way instead, they will be more likely to complete the purchase. 

Add a Convenience Fee to Any Purchase

One way you can save on processing fees is to impose a convenience fee for purchases. This passes the fee back onto the customer, while still allowing customers to make small purchase amounts. Just keep in mind that this may be a turn-off to customers. 

Upsell to Increase Purchase Amount

Many customers are willing to add onto their purchases to meet the minimum, as demonstrated by minimum free delivery charges. You can entice customers by offering promotions and add-on deals that increase purchase value while easily reaching that minimum threshold.  

Switch Payments Service Providers

Whether you’re just setting up your card processing system or looking to revamp it, using a payment service provider can pay dividends over the long term. It’s important to find a provider that offers fair pricing with no hidden fees, so you’re never surprised when the statement arrives. 

Pay.com lets you easily accept credit card payments, along with several other payment methods. It’s a simple and convenient system that allows you to choose which payment methods you’ll accept, track all your sales in one place, and easily keep track of all your fees. 

The Bottom Line: Should You Set a Minimum Purchase Amount?

Minimum purchase amounts are best for businesses that have a small profit margin and sell many low-priced products. If you find that your credit card fees are having a significant impact on your bottom line, it may be worth it to implement a minimum purchase amount. 

If you mainly sell higher-priced products, it may not be worth it to set a minimum. It also may not be worth it if you determine it would turn away customers and cost you in revenue. 

It’s always a fine line between imposing a minimum and alienating customers, but by finding other ways to increase value to the customer, either through superior products, great customer service, or awesome deals, they may be more willing to accept a minimum amount. 

Whether you decide to set a minimum or not, Pay.com can help you with the ins and outs of accepting payments. When you create an account with us, you can easily set up the payment methods that are best for your business. FAQ 

FAQs

Can you set a minimum purchase amount for credit cards?

Yes, no matter what type of store or service you run, you can legally set a minimum purchase amount for credit cards, up to $10. In doing so, though, you must have the same fees across all card types, as set by law.

Can you set a minimum purchase amount for debit cards?

You cannot set a minimum purchase amount for debit cards. However, while debit cards also have fees, they’re almost always lower than credit card processing fees and less of a burden to merchants.

Will setting a minimum purchase amount alienate customers?

As more people are ditching cash in favor of the convenience of credit cards, setting a minimum purchase amount may alienate some customers. However, if the amount is reasonable, it may not impact your business too much.

Can you set a maximum amount for credit card purchases?

You are generally not allowed to set maximum credit card purchase amounts, unless you are a government or educational institution. Otherwise, you must accept any large purchases via credit card without discrimination.

Meet the author

Ashley Hague

Ashley Hague is a B2B writer based in New Zealand. Specializing in fintech, SaaS, and sustainability in business, she helps businesses achieve their goals. When not working, she can be found rock climbing or delving into a historical biography.

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