We get a lot of questions surrounding the ability for merchants to charge their customers a surcharge or convenience fee for accepting credit cards. This post will attempt to provide a thorough overview of when convenience fees can be charged according to card regulations. We have also included excerpts from Visa, MasterCard, Discover, and American Express of the specific rules that govern the application of convenience fees. And if you are really interested and want nighttime reading, we have also included links to the complete operating regulations of these card brands here.
Here are the important points you need to know. The words “convenience fee” and “surcharge” are used interchangeably.
- A convenience fee cannot be assessed in a face-to-face environment
- A convenience fee cannot be assessed for recurring payments. The convenience fee was designed for one-time payments and not for payments in which a cardholder allows his credit card to be periodically charged for recurring goods or services. Examples of recurring charges include, but are not limited to, insurance premiums, subscriptions, Internet service provider monthly fees, membership dues, and utility charges.
- The merchant must provide a true “convenience” in the form of an alternative payment channel outside the merchant’s customary face-to-face payment channels, and the fee must be disclosed by the merchant to the cardholder as a charge for the alternative payment channel convenience that is provided.
- The convenience fee must be disclosed prior to the completion of the transaction, and the cardholder must be given the option to cancel the transaction if not wanting to pay the fee.
- The convenience fee must be included in the total amount of the transaction; it cannot be “split” out from the transaction amount.
- If a convenience fee is assessed it must be for all payments (V, MC, Discover, AMEX, ACH, Check) within a particular payment channel (mail, phone, internet).
- Since all convenience fees are required to be assessed equally, a merchant who accepts Visa is restricted to a flat convenience fee for all cards.
Let us know if you have any questions or if your understanding is different. Read the rest of the article here.