Understanding Service Fees
Service Fees Explained
We have discussed surcharge fees and convenience fees in other blog posts. Service fees are the third type of “additional fee” the card brands allow merchants to add to the cost of their goods or services. Surcharging is the most regulated of the three with stricter requirements from the card brands. Convenience fees are not as regulated but have more requirements than service fees which tend to be more flexible in how you can charge or calculate the fee. However, service fees are strictly reserved for merchants that fall within one of the following merchant category codes (MCC).
- 8211 (Elementary and Secondary Schools)
- 8220 (Colleges, Universities, Professional Schools, and Junior Colleges)
- 8244 (Business and Secretarial Schools)
- 8249 (Vocational and Trade Schools)
- 9211 (Court Costs, Including Alimony and Child Support)
- 9222 (Fines)
- 9311 (Tax Payments)
- 9399 (Government Services [Not Elsewhere Classified])
Service Fee Options
While service fees are limited to only the merchants in the above categories there is no limitation on where you can apply the service fee, like in person, online or over the phone. All are allowed. You can also charge a service fee for recurring payments while convenience fees prohibit this practice.
Additionally service fees may be charged as both a percentage of the transaction, like 2%, or as a flat fee, like $9.99. Merchants can also get creative and charge a service fee of 2% with a minimum of $5.00, for example.
As can be seen from the list above, service fees are reserved for education or government merchants. They are often used by these entities to cover their costs of processing transactions and putting that burden back onto their citizens or students.