Convenience fees are charges levied to cardholders for the privilege of paying for a product or service using an alternative payment, or a payment method that is not standard for the merchant. Movie theaters, for example, typically sell tickets face-to-face at the box office. However, if a movie theater gives customers the alternative option of paying online using a credit card, then that theater could charge a convenience fee. Technically, the cardholder is not paying for using a credit card, but for the privilege of using the online option.
Below, are the rules implemented by Visa, MasterCard, Discover, and American Express so you can have a better idea of what you might have to do to charge a convenience fee.
According to Visa, a merchant is permitted to charge a convenience fee to the customer. The fee must be a flat fee (not a percentage of the transaction amount), clearly disclosed, and represent payment for the convenience of paying through an alternate payment channel (such as online) that is different than the merchant’s normal payment channel (for example sending a check through the mail or paying in person).
Can only be charged online
Cannot be charged if you are solely an online merchant (if you are, then consider a surcharge)
Must disclose clearly and give the cardholder a chance to cancel the payment before paying
Fee must be included in the total amount of the transaction and not charged separately
Cannot charge for recurring transactions or installment transactions
Cannot charge both a convenience fee and a surcharge
According to MasterCard's Rules a merchant is permitted to charge a fee (such as a bona fide commission, postage, expedited service or convenience fees, and the like) if the fee is imposed on all like transactions regardless of the form of payment used.
In other words, the fee cannot be charged if it is based on the payment method used (credit card vs cash), but can be charged for the privelege of paying through an alternative channel (online vs face-to-face).
American Express does not seem to have a policy on convenience fees, but it does not prohibit its merchants from charging them either. You can charge a convenience fee as long as:
- The fee fits the definition of convenience fee (as opposed to a surcharge)
- You do not discriminate against the use of the American Express card
- You disclose the fee to the cardholder and give the cardholder a chance to back out
Like American Express, Discover does not seem to have a rule on convenience fees. Because there are no clear, stated rules on convenience fees, the only other consideration is Section 2.4 of Discover’s Merchant Operating Regulations R11.1. This rule requires the merchant to not discriminate against the use of the Discover card, similar to American Express’s policy. If you don’t charge a convenience fee for Visa but assess one for Discover, you would be in violation of this rule. From a practical standpoint, if you use the Visa rules and just add Discover card as a payment option, you should be satisfying Discover’s requirements for convenience fees.
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