$3 Minimum

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A few minutes ago, a barista refused to accept my credit card because they have a $3 minimum. It’s common practice and I don’t mind at all. But I’m certain that other people are refused service for the same reasoning and never ask why. So let’s explain why yours truly is blogging without coffee.

The immediate reason for the $3 minimum relates to profitability. Credit cards cost the merchant (business) a certain amount of money to process the transaction. This amount varies, but usually has a minimum charge. Thus, the merchant actually loses money if a customer uses a credit card on a small transaction.

This raises the question: why do credit cards charge the merchants money? One, to make themselves competitive to consumers (they have to have a way to finance your rewards points and other perks). Two, credit card transactions are actually a complex service. To put it simply, the bank of your credit card has to verify your identity and the validity of the transaction extraordinarily fast. The authorization process requires communication between a minimum of three independent entities (the merchant, the acquirer, and the issuer).* You only get the product after they figure their shit out, so they do a lot of secondary processing long after you’ve drank that caffeinated ambrosia.

I implore you readers to question how the world works. It’s fascinatingly complex, and the simplest rules have layers of meaning behind them. A couple follow-up questions worth exploring: what are some other ways to create trust in a transaction? How are these methods better or worse than the credit system?

*Here’s a comprehensive overview if you’re interested.

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