December 19th, 2016 by Elma Jane
Surcharges and Convenience Fees:
A surcharge is a fee that is added to a card transaction, either as a set amount or a percentage of a transaction. Typically, used to cover the cost of the merchant service charge.
There are rules, exceptions and state laws to observe to ensure you are compliant.
At present there are surcharge bans in the following states:
California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas. (Appeals are pending for California and Florida)
Surcharge Rules:
- Applicable only to credit card transactions, not debit or prepaid card transactions.
- The surcharge cannot be greater than the merchant’s average discount rate for that brand’s credit card transactions.
- Maximum surcharge allowed is 4%.
- Cardholder must be notified of the surcharge.
- Surcharge must be listed on the receipt as a line item and the primary payment amount must be processed together as one transaction.
A convenience fee is a fee charged for the “convenience” of being able to pay using an alternative payment channel outside the merchant’s customary payment channel.
Any merchant can charge a convenience fee IF the fee charged is for the legitimate convenience of being able to pay using a different payment channel than the merchant’s usual payment channel.
Example: Your business customary payment channel is face-to-face or card present and you provide an alternative payment channel, such as the option to pay by phone using a credit card, that could then charge a convenience fee along with the payment.
Mail Order/Telephone Order (MOTO) merchants and ecommerce merchants, whose customary payment channel is exclusively non face-to-face or card-not-present, are NOT permitted to charge convenience fees.
Convenience Fee Rules:
- Customer must be notified of the convenience fee prior to finalizing payment and given the opportunity to cancel.
- Payment must take place through an alternative payment channel.
- The fee can only be added to a non face-to-face transaction. Must be flat or fixed, regardless of the value of the payment due.
- The fee must be applied to all means of payment accepted through the alternative payment channel. Must be included in the total transaction amount.
Posted in Best Practices for Merchants, e-commerce & m-commerce, Mail Order Telephone Order Tagged with: card-not-present, Convenience Fees, credit card, debit, ecommerce, merchant, moto, payment, prepaid card, Surcharges, transaction