Are you taking advantage of Dodd-Frank?

Merchants, are interchange fees on small purchases killing your bottom line? Don’t forget that the Dodd-Frank Act of 2010 allows you to set a minimum purchase limit of $10 for all credit card transactions. You’ve probably seen one of these signs when you’ve gone to get gas or visited a convenience store. They’ve been around for a while now but became legal in 2010.

The act itself was a series of legislation brought about by the Great Recession and represented the most significant overhaul of the American financial sector since the Great Depression. Introduced by House Financial Services Committee Chair Barney Frank (D-MA) and Senate Banking Committee Chair Chris Dodd (D-CT) it aimed to consolidate regulatory agencies, regulate the financial markets, provide consumer protection, increasing international standards and cooperation, and providing tools to mitigate another financial crisis.

Merchants had asked Congress for help and Congress responded. Many merchants had already imposed minimum limits already but the legality of such an act was in question. The answer was provided tucked in as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act on page 698 and gave merchants the legal ability to set a minimum credit card purchase price of up to $10. That has been a godsend for merchants where profit margins were already thin. Debit cards are not included in the legislation (and due to lower interchange fees are not as much of a problem).

Many cashless consumers did not like this but it is only fair. A merchant like yourself should not lose money on a transaction. With the various fees associated with using a credit card being as high as they are it was the only real logical step other than raising prices which would only drive away more business. Don’t forget that as a merchant you also have the ability to not set a minimum or to set any minimum under $10.

If you are not taking advantage of this that is up to you but it is one tool in your belt to help offset high interchange fees and you should take advantage of every available option. One other thing to consider is educating your customer as to why you are doing this. Even today many do not understand how credit card processing works and a little education can go a long way. If your customers understand why something is being done there will be grumbling but in the end it will be accepted. Just make sure your customers know before they get to the checkout!