Can You Charge a Convenience Fee
For Credit Cards?
There are nearly 2 billion credit cards in use in the United States, according to Statistic Brain.
And according to a 2017 TSYS Consumer Payment Study, 33% of Americans prefer to pay with a credit card, while only 12% would rather use cash.
It’s clear that fewer and fewer people are using cash for transactions, a fact that has serious implications for merchants.
To compensate for the costs of accepting credit cards, some merchants charge a credit card convenience fee. Is this legal? Can you charge a convenience fee for credit cards?
Credit card convenience fees
A convenience fee is a fee that’s passed on to customers for the convenience of paying with a credit card, but only when the payment method is not a standard service provided by the merchant. For example, a standard service may refer to a customer paying for a purchase in person (card present transactions).
However, if a merchant offers alternative, more convenience methods—like paying online or over the phone—they’re allowed to charge a credit card convenience fee. These fees must be flat or fixed rates and must be included in the total transaction amount. Businesses that routinely accept credit cards typically built the cost of accepting cards into their prices.
Think about the last time you bought concert tickets. If you purchased these tickets from a third-party website, you probably paid a convenience fee. This is charged for the convenience of using an alternative payment channel and is typically a flat dollar amount.
Credit card convenience fees shouldn’t be confused with credit card surcharges. Think about purchases you’ve made at gas stations. Do you remember seeing signs that display a fee for using your credit card? That’s a surcharge fee. It’s a percentage of the total amount that’s charged simply for using a credit card. Ultimately, it helps cover the processing fees the business pays to its merchant services provider.
The benefits of charging a convenience fee
Ultimately, credit card processing is not free—merchants have to pay a fee every time they accept a credit card payment.
Convenience fees can help merchants manage these processing fees more effectively. Charging a convenience fee helps merchants offset their overall processing fees by passing on a portion of their processing fees to the customer, making it less expensive for businesses to process credit card payments.
Can you charge a convenience fee for credit cards?
Yes, but limitations exist. Keep in mind that each credit card network (Visa, MasterCard, American Express, Discover) has its own policy on convenience fees that outlines what merchants can and cannot do.
Visa allows convenience fees, but only when all three of these requirements are met: the payment must take place across an alternative payment channel, such as online or by phone; customers must be told about the fee in advance, or it must be clearly disclosed; and the fee must be a flat or fixed price rather than a percentage of the sale.
MasterCard allows government agencies and educational institutions to charge a credit card convenience fee as long as they also offer other payment channels.
American Express allows convenience fees for certain types of transactions as long as the customer’s use of a credit card is actually a convenience. Any convenience fee must be disclosed before it can be charged to the customer.
Discover doesn’t have a policy on credit card convenience fees. Instead, Discover only requires that merchants treat all credit cards the same. That means merchants can’t charge a convenience fee on Discover credit card transactions, but not on Visa transactions.
Convenience fees can also be charged on debit card transactions, since these cards are often processed in the same way as credit cards when used online, over the phone, or at payment kiosks.
How to charge a convenience fee for credit cards
EBizCharge is a PCI-compliant payment gateway that makes it easy for merchants to add a convenience fee to transactions.
Merchants can add a convenience fee as a flat rate or as a percentage by pasting this code into the EBizCharge payment gateway settings, then adjusting the amount or percentage that’s added to the transaction.
These settings will automatically apply a convenience fee to a transaction, making it quick and easy for merchants to charge a convenience fee for credit cards.