About Convenience Fees and Card Payment Solutions

Are surcharges and convenience fees the same thing?

This is a tricky one.

Some card brands don’t allow merchants to use a surcharge to recover payment acceptance costs or to penalize customers for using a certain payment type. But they do permit merchants to charge fees–fees that reward the merchant for offering alternative payment methods that give customers added convenience. As with many other facets of fees, it’s important that merchants use the right terms and follow the rules of each card brand.

When and where can merchants charge convenience fees?

Much like the distinction between surcharges and fees, each card brand has specific rules when it comes to when and where merchants can charge convenience fees.

Visa’s Operating Regulations state that merchants who operate in face-to-face environments may charge fees for purchases made via alternative channels like a website. On the other hand, merchants who operate solely in non-face-to-face mediums, like mail/telephone order or e-commerce, may not levy a fee.

Conversely, MasterCard allows fees on face-to-face transactions and on payments made via phone or the web.

Discover permits convenience fees (they call them surcharges), as long as the fee is applied equally for all card payments solutions (or card brands). This means that if merchants follow the rules of Visa and MasterCard, they must comply with those of Discover as well.

American Express also allows fees, but only for Government and Higher Education merchants category codes.

In addition to rules determining whether convenience fees are allowed, card brands also have rules for dictating whether the fees can be based on a flat rate (e.g., $4.00 per transaction) or a variable amount (e.g., 4% of the transaction). Visa, for one, permits variable fees, but only on credit card transactions. It’s important to check the rules of the specific card brand.

Lastly, there are certain states where the law prohibits merchants from charging consumers a fee for credit card transactions. These include Oklahoma, California, Florida, Colorado, Massachusetts, Connecticut, Kansas, Maine, New York and Texas.

Can government entities and tax-exempt organizations charge convenience fees?

Both Visa and MasterCard have separate rules when it comes to government entities and convenience fees, but they do allow them to charge fees in some situations. For example, your county government might charge you a 3% convenience fee for paying your taxes online with a credit card instead of paying via check. It all depends on the specific rules of the card brand and its eligibility requirements.

I hope this post has answered some of your questions regarding convenience fees. If you have more, contact your payment processor. You can also visit a specific webpage we’ve developed on this very topic. They should be able to walk you through some of the more complicated areas and specific card brand rules.