What Is A Convenience Fee?

Convenience fees are a way for businesses to recoup payment processing costs. But charging convenience fees may deter some customers. How do you know if it’s the right choice for you?

If your business has started accepting new payment methods for the convenience of your customers, you may be considering charging convenience fees to keep costs down.

This guide takes a deep dive into convenience fees, including how convenience fees differ from surcharges, credit card convenience fee rules, and how to notify customers that your business charges convenience fees.

What Is A Convenience Fee?

A convenience fee is a fee charged by a business when a customer makes a payment via a non-standard payment method. Convenience fees are most commonly charged for online, phone, or credit card payments. Convenience fees may be charged either as a flat fee or a percentage of the transaction.

Although both are used to help businesses cover the cost of credit card processing fees, convenience fees and surcharges are distinct from one another. Surcharges are specific to credit cards, while convenience fees are charged when a customer chooses to pay with a credit card rather than a “preferred” standard method such as cash or ACH.

How Does A Convenience Fee Work?

Convenience fees are most commonly applied to payments such as utilities, rent, tuition, government fees (e.g., motor vehicle registration fees), and even taxes. All these fees tend to be traditionally payable by check or in person, so payment online by a credit card is an added convenience.

For example, a customer may be charged a convenience fee when purchasing a movie ticket online, as movie theaters usually sell tickets at the box office. When the movie theater owner chooses to offer an alternate way to buy tickets via online sales, customers are required to pay with a credit card. The theater can then charge a convenience fee for online purchases because those who do not wish to pay the convenience fee can always buy in person at the box office.

There are rules for how you can charge a convenience fee, and they differ with every card.

Visa has the most thorough policy on the subject, while Discover and American Express are rather vague and rely on broader rules that apply to how merchants accept card payments in general.

Convenience Fees VS Surcharges

Like a convenience fee, a credit card surcharge is another way to offset credit card processing fees. A surcharge is not the same as a convenience fee, though they are often confused with each other.

Generally, a surcharge is added to a product or service’s regular price when a customer pays with a credit card. It can be applied to all credit card payments for a specific card or to specific categories of products. You do not need primary or secondary payment channels to institute surcharges, which makes things a bit simpler.

However, not every state allows surcharges. The rules related to surcharges are complex, so be sure to speak to your credit card acquirer to make sure you follow all the rules before you start charging this fee.

How To Charge Convenience Fees: Payment Card Rules

To charge convenience fees, you’ll need to comply with convenience fee regulations. Each credit card company has its own rules on charging convenience fees, and they all encourage merchants to speak to their card acquirer when considering adding a convenience fee. As convenience fee rules are subject to change, it’s best to work with your credit card processor to ensure compliance.

Below, we will go through 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.

Example Credit Card Convenience Fee Notice

Here’s an example of a convenience fee charge notice for US-based businesses:

CONVENIENCE FEE NOTICE: The option to pay [YOUR BUSINESS NAME] via  [PAYMENT METHOD] is provided to you for your convenience. If you proceed to checkout, you will be charged a convenience fee of [INSERT AMOUNT]. This fee is added to the total charge for the goods/service you purchased today. If you do not wish to pay this fee, please click “cancel” below to return to the previous page. You may pay us by [CHECK, ACH, IN PERSON] without incurring this convenience fee.

As Visa has the most detailed requirements for convenience fees, this notice adheres to Visa’s regulations. As such, this notice should satisfy the rules imposed by other card networks. Generally, where a convenience fee is allowed (US, Asia Pacific), there’s no strict wording requirement for the notice itself (excluding Russia).

Are Convenience Fees The Right Choice For Your Business?

Convenience fees are used to help reduce costs associated with payment processing but can only be used when there is another “standard” way for the customer to pay. If you wish to impose a convenience fee, contact your credit card acquirer. They can help you follow all the rules from the credit card companies as well as tell you how much you can charge for the fee.

However, it’s important to keep in mind that we are moving toward a society where most customers don’t carry cash and businesses are implementing entirely cashless payment systems. Charging a convenience fee may drive away customers or entice them, depending on the circumstances. For example, many people might be happy to pay a small fee to renew their driver’s license online, but might be put off if a restaurant charges a 4% convenience fee to pay with a card.

Before you start charging a convenience fee, be sure there is a demand for it, or you might end up with an alternate payment method that no one uses.