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Credit Card Rules For Merchants
Little-Known - But Important
By Jamie D
Businesses that accept credit and debit cards must comply with privacy laws
that aim to protect customer identity
. There are regulations that even the most seasoned of merchants aren't always aware of. It's important for merchants, as well as consumers, to be aware of these little known credit card rules to protect themselves and their information.Stay Compliant with Federal Laws
The Fair Credit Reporting Act
is the federal law that establishes the foundation of consumer credit rights. This law regulates the collection and use of consumer credit information by merchants.
Passed as an amendment to the Fair Credit Report Act, the Fair and Accurate Credit Transaction Act
prohibits merchants from showing credit card numbers on receipts. To comply with this law, businesses must truncate credit card information
on electronically printed receipts. Merchants can include no more than the last five digits of the card number and must delete the card's expiration date.
Example: ACCT: **********00714
The law does not apply to imprinted or handwritten receipts however merchants using these are also required to protect customer identity. For more information, check out the Federal Trade Commission's guide Slip Showing
?.Comply with State Laws
After complying with the Fair Credit Reporting and Accurate Credit Transaction Act, be sure to familiarize yourself with your state's laws on the use of consumer credit information.
Many states have laws that establish what kind of information merchants can and cannot ask for or write down when a customer uses a credit card. For example, California prohibits merchants from requesting or requiring that a consumer write any personal information (like their address or telephone number) on any form associated with their credit card transaction.
Not all states have additional laws that specifically regulate credit card practices. For more information, read more about state merchant laws
*, or check with a small business expert in your state
. Beyond the Law - Merchant contracts
Beyond these government regulations, credit card practices are also policed by the credit card companies themselves through terms of service or rules manuals. These agreements details how transactions using their cards should be carried out.
Interestingly, many merchants cannot require a customer to provide identification as a requirement for accepting a credit card. Although a merchant is allow to ask for identification, customers can refuse without suffering a penalty. The rules manual for popular cards like Visa
or MasterCard state that a merchant must accept their card regardless of whether or not the customer provides personal identification. Note: If a customer prefers to be asked for identification, they can write "See I.D" or "Ask for I.D." on the back of their card. Although merchants are not required to follow this request, many happily comply.
Another little-known, but common, rule is that credit card companies generally prohibit merchants from establishing a "minimum purchase amount" when processing transactions with their cards. Its very common to walk into a store and see a sign stating that credit card transactions require a $10 minimum purchase. Credit card companies want to promote the use of their cards and usually include rules that prohibit merchants from making these statements. More often than not, these merchants are violating their processing agreement with their card companies. Official rules vary from card to card but its safe to say that it's either strongly discouraged or explicitly prohibited in many agreements. Unfortunately for small businesses, transaction fees often mean that a small purchase made on a credit card hurts their profits. Note: Check out this discussion
to see what the community as to say about minimum purchases.
It is not uncommon for merchants to ignore aspects of their rules manuals, usually because many are unaware the rules even exist. Businesses should be sure to review the rules manuals for each company whose card they accept as payment. Consumers should do the same to be aware of the rights they have for each card they carry.