Key Takeaways:
Distinct Payment Channel Charges: Convenience fees, flat fees for alternate payment channels, offer customers the convenience of paying through different methods (e.g., online) compared to the merchant’s primary channel (e.g., in-person). They’re only applicable when a different payment avenue is provided by the merchant.
Constraints and Clear Disclosure: These fees are fixed, not a percentage, and should only be applied to one-time, card-not-present transactions. They require explicit disclosure at purchase, allowing cardholders the right to cancel if such fees are applied. Certain merchant categories may have limitations on imposing convenience fees, regulated by specific programs like Visa’s Utility Rate program.
Convenience Fees Explained
A Convenience Fee is a flat fee (not a percentage of the transaction amount), clearly disclosed, that represents 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, paying in person). For example, a convenience fee may be added if your customer elects to pay you online, via SMS or mobile application, for example, in lieu of paying you through your primary in store over the counter payment method.
An Overview of Convenience Fees
For example, a Zoo in Kansas may not impose a convenience fee at the register. However, if they launch a program which allows individuals to purchase tickets online a convenience fee may be added. The convenience fee is paid because of the online payment, and not specifically because the customer used a credit card.
You can only charge convenience fees for one-time, card not present transactions. They are not allowed on recurring transactions or card present over the counter transactions on a terminal.
The convenience fee must be a fixed amount, like $9.99, it cannot be a percentage of the transaction. If you are charging a fee as a percentage of the transaction you are surcharging, which has a different set of rules and requirements from the card brands and governmental entities.
Additionally, convenience fees must be clearly displayed and disclosed at the time of purchase and cardholders must be given the opportunity to cancel a transaction where convenience fees are applied.
All merchants can charge convenience fees except merchants with MCC code 4900 if the are participating in the Visa Utility Rate program.
Cardholders may complain about convenience fees, but merchants often charge them in order to provide the convenience of utilizing an alternative method to pay for the same products or services.
