Can a business refuse to take credit cards from some customers, but take them from others?
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UPDATED: Jul 12, 2023
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UPDATED: Jul 12, 2023
It’s all about you. We want to help you make the right legal decisions.
We strive to help you make confident insurance and legal decisions. Finding trusted and reliable insurance quotes and legal advice should be easy. This doesn’t influence our content. Our opinions are our own.
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A credit card is not legal tender—it is merely one of many convenient ways of paying a debt. Just because a merchant accepts credit cards for payment of debts does not mean that they are compelled by law to do so.
Although there might be other reasons, one reason for refusing credit cards, particularly as payment for services, is when the merchant has gotten the impression that a customer may not be satisfied with their purchase and might later dispute the charge with the credit card company.
A merchant is legally entitled to demand any form of payment they wish. If they demand cash, this is their right. If they demand payment by way of chickens, or oranges, or gold bullion, this is also their right. If a merchant does not wish to take a chance of accepting a credit card payment and instead require secured payment in the form of a cashier’s check, they can. In addition, they can accept a credit card from one patron and refuse a credit card from another.
It may be the case that a store policy requires a photo ID be presented with a credit card at the time of purchase. If two customers both wish to pay with a credit card, and one has ID while the other does not—it is perfectly within the merchant’s right to refuse the payment from the individual that does not have identification.
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Refusing Credit Cards for Small Purchases
I recent years, more and more merchants have been implementing minimum purchase policies for credit cards; and they are well within their rights to do so. Both state and federal law allow for business owners to deny credit cards as payment. Many merchants choose to set a minimum amount for credit cards and if a customer chooses to buy less than this amount, they will have to use cash. This is because credit card companies charge business owners anywhere from 1-3% of purchases; in other words, the merchant has to pay out to the credit card company each time a customer uses a credit card (these figures vary for each credit card company), so if a merchant decides that paying out for small purchases does not yield them enough profit due to having to pay the credit card company each time, they may can include a minimum credit card policy.
Merchants do have the option, however, of merely increasing their prices in order to make up for lost revenue for paying credit card companies. So in the end, it may be better to purchase items at a store that has a minimum credit card policy and buy a few more items, than to purchase a few items with cash at an establishment that has increased prices but has no minimum policy.
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Case Studies: Selective Acceptance of Credit Cards From Customers
Case Study 1: Disputable Transactions
John owns an art gallery that has experienced several instances of customers disputing credit card charges in the past. These disputes have caused financial losses and administrative burdens for the gallery. To mitigate the risk of future chargebacks, John decides to refuse credit card payments from customers who have previously disputed charges with other merchants.
Case Study 2: Identification Requirements
Sarah operates a boutique store that has implemented a policy requiring customers to present valid photo identification along with their credit cards during purchases. One day, two customers approach the cashier to pay with credit cards. Customer One complies with the identification requirement and presents a valid ID, while Customer Two fails to provide any identification.
Following the store’s policy, Sarah refuses to accept credit card payment from Customer Two due to the lack of proper identification. This decision helps Sarah ensure the security of credit card transactions and mitigate the risk of potential fraudulent activities.
Case Study 3: Minimum Purchase Policy
Emily owns a café that incurs significant fees for credit card processing, especially for small purchases. To address this issue, she establishes a minimum purchase policy for credit card transactions. The policy states that customers must spend a minimum of $10 to be eligible for credit card payment.
This enables Emily to cover the costs associated with credit card processing and maintain profitability, particularly for lower-value transactions. Customers who wish to make smaller purchases are informed of this policy and can choose to pay with cash or meet the minimum purchase requirement for credit card usage.
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Editorial Guidelines: We are a free online resource for anyone interested in learning more about legal topics and insurance. Our goal is to be an objective, third-party resource for everything legal and insurance related. We update our site regularly, and all content is reviewed by experts.