Lets say you get up one morning to go to the donut shop to grab something to eat.  You find out you don’t have any cash on hand but plastic. Your bill came out to $2.25 and you hand them your card.  They then point to a sign that says $5 minimum purchase for credit card transactions.  You get upset and may or may not complete your purchase.  But you wonder, is this allowed?  The answer is no, even though many merchants enforce this policy.  It is against Visa/MC rules.  There are other things you can do such as a cash discount, but you can not refuse a credit card sale regardless of the amount.

If your credit card processing company finds out, they will immediately terminate your account and it may be impossible to ever get one again. So I highly recommend against this practice, it just doesn’t work out overall to benefit the merchant. How many customers will you alienate in the process? I totally agree that it can be difficult to manage the cost when dealing with such low transaction sizes, but consider this.  That same customer may come back or is a regular that will spend a lot more next time when he has his family with them.

Mike from allbusiness.com is troubled by how many retailers that do not have a presence online.  Many customers will visit your online store long before they will drive to a retail location.  They also use web sites to find out what kind of products you carry, research your pricing & product info and if they can find any special deals offered online instead of in the store.   However, it changes when you are dealing with younger adults.  Many of them shop exclusively online and wont ever walk into your retail establishment.   So do you already have an online store?  If not, what are you waiting for?  It is 2009, it is time to get with the program.  Open up your store, setup your shopping cart, get your credit card processing integrated and start selling!

Dr. Wilson wrote an interesting article on how to shop for a merchant account. There are a few points he mentioned that I would like to discuss as some I do not agree with.  He does a good job with the definition clarifications.   I do not agree with his comment about a merchant may not be able to save money on Interchange plus pricing unless they have a lot of mid/nonqual.  You really can’t compare the two pricing models, but Interchange plus is always the way to go.  As he stated, it is more transparent and you know the exact profit you are dealing with.  Why would you go for the other when you have no idea if you are wasting your time on a possible few dollar savings?  I also disagree with his comment on the early termination fees.  I think it is critical to have some kind of agreement in place. credit card processing companies invest a lot of money, resources and time boarding a single merchant. To have them cancel in 3 months because their business didn’t pan out, is a solid way for them to lose a lot of money. He also recommends contacting your bank first, which I would not for various reasons. Many smaller banks simply outsource the service to companies such as ourselves. Second, I have found many banks, especially the bigger ones to take advantage of that relationship and not offer the most competitive pricing. Lastly, he does mention look online for complaints about the company, which is a great idea!