Surcharge versus Convenience Fees

Visa and MasterCard strongly prohibit merchants from charging a surcharge to cardholders who use their credit cards for purchases.  However, the Association do make a distinction between a surcharge and a convenience fee.  A convenience fee is allowed provided it meets the requirements as described below.

A surcharge is charged only to credit card sales, therefore disadvantages the cardholder as a fee for the privilege of using a credit card.  The associations prohibit this.

A convenience fee is charged to all payment methods.  The payment method must provide a convenience, is in a non-face-to-face environment, and is outside the merchant’s normal payment channel.  For example: a convenience fee id typically to customers who pay over the phone, but no to customers who go into the store or office.  The convenience fee does not relate to the form of payment but rather how the payment occurs.

According to Visa, the convenience fee must be a fixed amount regardless of the amount; it cannot be a percentage of the amount paid or based on a sliding scale of the amount paid.  This differs from MasterCard, which does permit percentage based and tiered rate convenience fees.

The convenience fee must be disclosed to the cardholder prior to completion of the transaction. Convenience fees cannot be advertised by the merchant as an offset to the cost of accepting credit cards.

There are other fees that may be added to a transaction such as a handling fee or processing fees.  These fees are not part of the credit card acceptance and are added regardless of payment. One example would be ticket fees added by TicketMaster.