Sometimes businesses will try to mitigate their processing costs by charging a fee whenever a customer uses a credit card. Two kinds of fees are the most common: convenience fees and surcharges.
There are specific cases where either fee may be appropriate, but it’s important to know when it’s both appropriate and legal to use each.
A convenience fee can only be assessed when the payment type is considered nonstandard. For example, it’s nonstandard to pay tuition with a credit or debit card. Tuition payments are generally made using cash, check, or ACH payments. Schools, then, can legally charge convenience fees for credit card tuition payments.
Another common example of nonstandard payment acceptance is a movie theater charging convenience fees to those who purchase tickets online or over the phone. Box office ticket purchases are considered standard for movie theaters.
The legal convenience fee amount that can be charged is determined by the credit card companies. Some credit card companies are strict in their allowance of extra fees. Mastercard, for example, allows convenience fees only for government, education, and tax-related payments.
States may also have specific laws governing extra fees, so you should be sure your fees comply with state laws before assessing them to your customers.
Surcharges are another regulated type of credit card fee. Surcharges are simply fees assessed to any customer who uses a credit card.
Credit card companies and state governments heavily regulate these kinds of charges as well. In fact, surcharges are illegal in 11 US states and territories.1