Merchants to Implement $10 Minimum Purchase for Credit Cards Transactions

If you typically use your credit card for everyday small purchases like a latte or an $8 lunch, be prepared to lose the credit card rewards you get for those purchases.

Many of us are accustomed to pulling out that credit card whenever we make a purchase, no matter how small, to get those credit card rewards. That $4 latte in the morning—every morning—can add up, and the accompanying credit card rewards can help us get airline miles, cash back, and more. Major credit card merchants like Visa and MasterCard previously forbade merchants by contract from requiring a minimum purchase for credit card transactions and they stipulate that merchants cannot offer a discount to encourage other payment forms (like cash), but all of that is changing with the new financial reform bill.

Credit cards transactions cost merchants significantly more money than debit card transactions and it can sometimes account for one of a business’s highest overhead costs. This is especially true for the small business, and ABC News reports that small business shop owners usually end up taking a loss when they take credit cards for small ticket items such as soda and candy. When the new financial reform bill goes into effect, merchants can enforce a $10 minimum purchase limit for customers who want to use credit cards. In theory, the businesses would pass the savings back to the customer, but analysts are doubtful customers will see any difference in price.

This change does mean several important things for consumers, however. Consumers will now need to use a debit card (with a PIN) or keep at least $10 cash on them for small dollar purchases. It will also no longer be easy to obtain credit card rewards for small everyday purchases like an $8 lunch or a $4 latte. Even if you have a rewards check card, using a PIN usually voids any award you would typically receive. Additionally, by using cash or debit cards, customers will also lose out on the great protection credit cards offer for poor quality merchandise or fraud. Even though debit cards may have a Visa or MasterCard logo, if you use a PIN for a debit purchase, you don’t have the same protection as you do for a credit purchase. 

What you can do:

Carry cash or expect to make a PIN-based debit card purchase for anything under $10. If possible, bundle purchases so that your total amount exceeds $10 if you want to get rewards on the purchase. Additionally, you should always be on the look-out for good rewards programs for those purchases that do qualify for credit card rewards.

For the best information on credit card rates and rewards, click here.  

Editorial Disclosure: Opinions expressed here are those of the author, and have not been reviewed, approved or otherwise endorsed by any bank advertiser, card issuer, airline or hotel.

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Charge-Offs Resulting in Lower Credit Card Debt

Charge-Offs Resulting in Lower Credit Card Debt

Recent reports have shown a decrease in overall credit card debt, but are those reports showing a positive or a negative decrease?

It might sound like a good thing that Americans have lowered their credit card debt by more than $93 billion overall. But when you know the reason why the debt has been lowered by that amount, it won’t sound as good.

According to, a website that compares credit cards, Americans are not becoming more frugal but rather falling farther behind in their credit card bills. According to statistics, consumer debt fell from $969.3 billion in the fourth quarter of 2008 to $876.1 billion in the last quarter of 2009. But in the third quarter of 2009, bank charge-offs were at the highest they have been since 1985. This happens when consumers either declare bankruptcy or when their credit card debts become at least 180 days past due.

Unfortunately, about 90% of that decrease in credit card debt was due to bad debts being charged off. Only about $10 billion came from payoffs. What’s even worse is that much of that debt was paid off in the first quarter of 2009.

Many consumers are turning to debit cards due to recent restrictions and limits placed on consumers. The average American household has nine credit cards, but they are slowly turning away from them as interest rates continue to rise and as they fall deeper into debt.

On the bright side, it looks like the recent economic recovery may be good news. With the new regulations placed on credit cards, it may help consumers get control of their debt and pay it off sooner. One of the new regulations is that credit card companies must include a graph on how long it will take a consumer to pay off their balance if they simply make the minimum payments and how much they will pay by the time they pay it off. The card companies must also include a graph which shows how much they will have to pay each month in order to pay off their balances within three years.

However, it remains to be seen if the average American consumer has learned their lesson. How soon will they forget about how easy it was for them to fall into debt? Once they reduce their debt, how long will it be before they start charging stuff again. According to John Ulzheimer, the president of consumer education for, assuming that people have learned their lesson is a bit “optimistic.” He believes people will continue to use their credit cards and submitting applications as soon as banks start loosening their regulations on credit.

Everything right now is speculation and nobody knows for sure what would happen if people actually paid off their credit card balances en masse. It would, however, be a great thing for individual households and for the economy in general.

Editorial Disclosure: Opinions expressed here are those of the author, and have not been reviewed, approved or otherwise endorsed by any bank advertiser, card issuer, airline or hotel.

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Paying Your Taxes with a Credit Card is Bad News

With tax time approaching, many taxpayers are finding themselves in a financial bind. If you end up owing this year, should you use your credit card to pay the IRS?

With the tax deadline fast approaching, many people are looking to their credit cards to pay off their tax balances. While this may seem like a quick and painless way to take care of your tax burden, it often ends up costing you more in one way or another. Here are some things you should know about paying your taxes with a credit card.

• When you make a credit card payment for your taxes, you are actually making the payment to a third-party company who then sends it to the IRS. These third-party companies charge a fee which can become quite significant depending on your tax debt. With a modest 2.45% fee, you could be paying an extra $122.50 on a $5,000 tax bill. Aren’t there better uses for your money?

• Interest charges can quickly accumulate on a credit card bill after paying your taxes. Interest rates have gone up in the past year and you could get charged other penalties if you are not careful.

• Make sure that your payment will not be considered a cash advance. This happens sometimes and it can cost you big bucks because a cash advance on a credit card has a larger interest rate than a purchase. In addition, the card issuer often charges 3% as a cash advance fee.

• Check into getting an IRS installment loan if you cannot afford to pay your taxes on time. The rates for these types of loans are usually only about 4%, which is much lower than the interest rates you will be paying on most credit cards. You can also try a personal loan with an even lower interest rate to save more money.

• Do not pay your taxes with your credit card simply to get the reward points. Most cards only offer a 1% cash back system which is nowhere near the amount you will pay in interest on your credit card.

• Know your credit limit before charging your taxes to your credit card. If you are close to your limit, you may incur even more fees and penalties on top of the higher interest rate.

The best thing to do if you end up owing taxes is to find out why you have not been paying enough throughout the year. Look over your records and see where you made mistakes so you can adjust the amount you pay so you don’t come out owing next year. Credit cards may seem like a quick fix, but eventually you have to pay that money back, too. It can turn into a vicious cycle if you’re not careful.

Editorial Disclosure: Opinions expressed here are those of the author, and have not been reviewed, approved or otherwise endorsed by any bank advertiser, card issuer, airline or hotel.

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