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Merchant Use of Convenience Fees

Merchants are prohibited by card association rules from billing consumers a fee for using a credit card. This is considered surcharging. The prohibition on surcharging ensures that credit cardholders are not discriminated against at the point-of-sale. However, discounts on cash purchases are permitted. Also, surcharging is different from a situation in which particular business cases (i.e. government or schools) may warrant imposition of a convenience fee for utilization of specific alternative payment modes, such as Internet and telephone.

The card associations have found that convenience fees are a barrier to card acceptance and various requirements have been established by the card associations. The requirements vary by card association and these guidelines and best practices are based on acceptance of all card brands.

A merchant that charges a convenience fee must ensure that the fee is:

  • Charged for a bona fide convenience in the form of an alternative payment channel (i.e. Internet payments, IVR payments) outside the merchant’s customary payment channels
  • Disclosed to the Cardholder as a charge for the alternative payment channel convenience.
  • Added only to a non face-to-face transaction
  • A flat or fixed amount, regardless of the value of the payment due
  • Applicable to all forms of payment accepted in the alternative payment channel
  • Disclosed prior to the completion of the transaction and the cardholder is given the opportunity to cancel
  • Included as a part of the total amount of the transaction.

Imposing a convenience fee has been found by the card associations to impede consumer credit card payments, so be aware of the potential for changes to current policy and procedures.

Effective April 2005, a special Visa program is being launched for registered Utility MCC 4900 merchants who affirm they will abstain from charging convenience fees associated with bill payments.

A percentage-based fee is permitted ONLY for consumer tax payments. This is a pilot program available at this time for registered merchants only if the merchant or their third party servicer has demonstrated compliance with Payment Card Industry Data Security Standards (PCI DSS).

In the normal course of business, the card associations do not monitor other merchant fees that are uniformly applied to all payment types, such as shipping and handling fees or student registration fees, since they do not discriminate or limit card acceptance.

Some merchants, such as ticket sellers and travel agents, may charge consumers for costs associated with the value-added services they provide and the merchant name and other transaction data must indicate the merchant of record. Businesses that facilitate credit card payments for other merchants are subject to additional requirements and require registration and interaction between EXS and the Card Association.

Note: The requirement for an alternate payment channel means that MOTO and electronic commerce merchants whose payment channels are exclusively non face-to-face may NOT impose a Convenience Fee. A merchant who accepts face-to-face payments is not required to accept cards through this payment channel to meet the above requirement.



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