Convenience Fees, Service Fees, and Surcharge Fees

What is a Convenience Fee?

A convenience fee is a charge passed on to customers to cover the cost of using an alternative payment method that is not standard for a business. Businesses that traditionally accept cash or checks for transactions but also offer credit or debit card payments for convenience may charge an additional fee for that convenience. For example, a doctor’s office may typically accept payments in person. However, if the doctor’s office offers customers the option to pay via phone, it may charge an additional fee. Convenience fees are typically a set amount, not a percentage of the total payment. These fees must be disclosed upfront to the customer. Consumers can often avoid convenience fees by using standard payment methods like cash or automated clearing house (ACH).

What is a Service Fee?

A service fee is a type of convenience fee program with a modified set of rules. This program is restricted to merchants within specific merchant category codes (MCC), such as those in education and government. American Express, Visa, and Mastercard each have unique rules governing these programs. Visa refers to the Education/Government Convenience Fee Program as the “Service Fee” program, while Mastercard and American Express use the term “Convenience Fee Program” regardless of MCC. Only certain qualifying merchants are eligible for this program.

What is a Surcharge Fee?

A surcharge is applied by merchants to offset credit card processing fees. Unlike convenience fees, a surcharge is specifically for transactions made with credit cards and is calculated as a percentage of the transaction amount. Surcharges are applicable only to credit card transactions, not permitted in all states, and require compliance with specific rules set by card networks and legal regulations.

Effective April 15, 2023, Visa set a maximum surcharge cap of 3%, which applies across all card brands. Merchants should consult their merchant account provider and legal counsel to ensure compliance with state laws and card network rules before implementing surcharges.

How is a Surcharge Fee different from a Convenience Fee?

Convenience fees are charged when a merchant offers consumers the privilege of using an alternative, non-standard payment method and are allowed in all 50 states. Surcharges are applied to credit card transactions to cover merchant processing fees.

Consumer Tips to Avoid Fees

• Understand your payment options.
• Whenever possible, opt for payment methods that do not incur additional fees.
• Consider paying in cash. Some merchants offer a discount when using cash.
• If you are still unsure, inquire about any payment fees before paying with a debit or credit card.
• Review online purchases before clicking on final payment to determine whether fees apply.
• For in-store purchases, look for signs about purchase fees by the cash register.

If you believe you were wrongly charged a fee:

• Contact the store and request a refund. Share the basis for your refund request. 
• Discuss the accuracy of the charge with your financial institution and submit a dispute, if necessary.
• You can report complaints or violations to the applicable credit card carrier online: Visa; Mastercard.