In recent years, there has been a lot of confusion about whether merchants can pass along the credit card processing fees to the consumers – aka, the Surcharge. Initially, the federal court denied all merchants the right to charge the consumer a surcharge to cover the credit card transaction fee. However, after many years of appeal, the merchants prevailed, with a few caveats, of course. Merchants were granted the right charge customers a convenience fee and the “infamous” surcharge provided that they followed certain procedures.
Convenience Fee
Generally speaking, all merchants are allowed to charge their customers a convenience fee for using a credit card if the merchant provides a “customarily accepted,” alternative payment method. For example, if a merchant customarily accepts payments via check, a convenience fee may be added if their customer uses a credit card.
There are procedures in place to ensure that consumers are aware of the additional cost. Convenience fees must be clearly displayed by the merchant at the point of sale. In other merchants, should always advise the consumer of the convenience fee. As a practice, merchants should advise the consumer of the customary method of payment and offer the credit payment option with the proviso of the convenience fee.
A convenience fee can be charge on credit and debit cards, alike.
Surcharge
A surcharge is defined as the practice of merchants charging consumers a mandatory fee on all credit card transactions. This practice is most commonly seen when, you, the business owner, applies an “upcharge” to your clients bill in order to cover the credit card transaction fee. These surcharges are generally permissible unless otherwise restricted by state or federal law. Currently surcharges are prohibited in the following 10 states: Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas.
For the states that allow surcharges, businesses are still required to follow certain procedures to ensure that consumers are aware of the additional charge. The major credit card companies like, Visa, MasterCard, American Express and Discover, all require merchants to display a notice of the surcharge at the point of sale. This procedure applies to both in-store and online purchases. Furthermore, a consumer’s receipt must clearly indicate a surcharge was added to the bill.
In today’s marketplace, the debit card has become the go-to method of payment for most consumers. Hence, it is important to note that surcharges cannot be imposed on debit or prepaid debit transactions. This rule holds true even if a cardholder chooses “credit” as an option when using their debit card.
The Rationale
The rationale for providing a blanket approval for convenience fees is that the convenience fee is not a mandatory response to a credit card transaction. Instead, convenience fees are charged based of the method of payment. There is fee for the “convenience” of the expedited method of payment. The convenience fee is not mandatory. If the consumer wishes to avoid the fee, he/ she may use one of the alternative payment methods provided by the merchant.
