Understanding the Difference Between Surcharging and Convenience Fee

More and more I am asked questions about the following subjects. In an effort to clear up confusion, we hope this article will help to inform you.

Convenience Fees
A convenience fee is associated with an “added value” that the cardholder receives in connection with a non-face-to-face card purchase in the form of an alternate payment channel outside of the merchant’s customary payment channels. For instance, a movie theatre is permitted to charge a convenience fee to cardholders that purchase movie tickets for a future showing through the Internet. This alternate payment channel offers the cardholder added convenience since they do not have to be physically present to complete this transaction, thus a convenience fee is allowable. The movie theatre (this would be their customary payment channel), however, may not levy a “convenience fee” at the ticket counter.

​Visa and MasterCard define a Convenience Fee as a fee assessed by the merchant to the cardholder for payments processed through an alternative payment channel. A convenience fee cannot be assessed to the payments received in the customary, or standard, payment channel since there is no added convenience to the cardholder.

The standard convenience Fee rules are:
– Convenience Fee can only be charged in an alternative payment method.
– Non face to face transactions only.
– Disclose it is for using an alternative payment method.
– Has to be flat or fixed amount, not a percentage of the sale.
– Applicable to all alternate payments accepted including cash and check.
– Included in the transaction total.
– Disclosed prior to the completion of sale.
– Cannot be charged by a third party.
– Cannot be added to a recurring transaction.
– Cannot be assessed by e-commerce only merchants.
– The Fee must be clearly and conspicuously disclosed to the cardholder and afford the cardholder an opportunity to opt out of the sale.
– The fee should not be advertised as a fee assessed by MasterCard or Visa.
– The fee cannot be advertised or otherwise communicated as an offset to the merchant discount rate.

Offering the customer the option to pay with a credit card is not considered an added convenience, and merchants may not assess a convenience fee for any transaction completed through the customary payment channel.

Surcharging
A surcharge is a fee charged to the cardholder for using a credit card to pay for goods and/or services. Any merchant is able to implement a surcharge as long as they follow the guidelines.
The surcharge amount may not vary with each customer/transaction
The surcharge amount must be consistent, whether a flat fee or percentage is charged.
The MAXIMUM Surcharge Amount is 4%, however the surcharge must be in-line with the Discount Rate, i.e. effective rate of cards currently accepted. Merchants should calculate their effective rate for the past 6 months, and then take the average to obtain their surcharge amount.

Merchants must register and wait 30 days before implementing the surcharge.
Merchants must disclose at the Point of Entry to the store that they surcharge.
Merchants must disclose at the Point of Sale (checkout) that they surcharge.
Merchants must disclose the dollar amount surcharged on every receipt. Currently the only terminal certified with First Data to support surcharging are Dejavoo terminals.
Merchants MAY NOT surcharge any debit cards, signature, prepaid, or pin. Surcharging is for Credit Cards only.

Merchants who surcharge may still be liable for fines if they mistakenly surcharge a debit card.
Merchants who surcharge will not be able to accept American Express.

If you have questions about this subject or other concerns related to Point of Sales Systems or credit card processing, contact us anytime via email [email protected] or call us at 727-916-7294

This article was written by Megan Best of Electronic Payments and reprinted with permission. All Rights Reserved.