What Is A Convenience Fee? (2024)

FAQs

What Is A Convenience Fee? ›

A convenience fee is a fee charged by a business for payments made through an alternative channel, rather than by cash, check, or ACH. Typical cases where convenience fees are charged include payments for taxes and tuition. The fee is typically a fixed amount or a percentage of the sale.

The reason that many venues charge a convenience fee is that the bank and processor service both take a small percentage from each credit card payment the business processes.

Use a different payment method.

Merchants often charge convenience fees or surcharges when credit cards aren't a standard payment method. If you have a rent, utility or tax bill, consider paying by check or electronic transfer instead.

Convenience fees are legal in all 50 states but must be clearly communicated at the point of sale. Additionally, a convenience fee can only be imposed if there's another preferred form of payment as an option.

A pay-to-pay fee – also known as a convenience fee – is a fee charged by a company when you make a payment through a particular channel. For example, companies sometimes allow you to make a payment in person or by mail for free but charge you a fee for the convenience of taking your payment over the phone or online.

To date, only two states and one jurisdiction still outlaw the use of credit card surcharges. They are a result of non-qualified transactions of different communications methods.: Connecticut, Massachusetts, and Puerto Rico.

Is Debit Card Surcharging Legal? For debit cards and prepaid cards, surcharging is prohibited—even when the card is run as a signature-based transaction without the PIN. This restriction was implemented by the Durbin Amendment of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Convenience fees are normally a flat fee or a small percentage of the total payment, but they can add up to a substantial sum if the payments are large or recurring. You may be able to avoid convenience fees by paying with cash or another form of payment.

Convenience fees are not the same as tips or surcharges. They're charged to businesses like restaurants when their customers use a credit card to pay for service or product, and the restaurant passes the cost of that fee on to the consumer. This is why it may appear on your bill.

Even if a customer receives a refund on a product or service, convenience fees would not be included in that, as they are a separate charge.

Is it legal to charge a 3% credit card fee? ›

In 1985, California passed a law (Civil Code section 1748.1) that prohibited merchants from adding a surcharge (an extra fee) when customers pay by credit card instead of cash.

A credit card surcharge (or cc surcharge) is a fee enforced by the merchant to compensate for some of the cost of payment processing. This fee can only apply to credit cards—and never debit, even when a debit card is run like a credit.

A surcharge is a convenience fee specifically meant to cover the costs associated with a credit card transaction, while a service fee is restricted to only certain types of government or education merchants.

A convenience fee is levied by a merchant for offering customers the privilege of paying with an alternative non-standard payment method. Merchants can process convenience fees in all 50 states. A surcharge is levied by a merchant for customer purchases made with a credit card.

In most states, convenience fees and surcharges are legal under a certain percentage of the purchase price. There are currently 10 states where convenience fees and surcharges are prohibited—California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas and Puerto Rico.

A convenience fee is an extra charge levied by a merchant when you use a credit or debit card to pay instead of cash. This fee helps cover the cost that the merchant incurs to process card payments. It is typically a flat fee rather than a percentage of the transaction amount.

Convenience fees are normally a flat fee or a small percentage of the total payment, but they can add up to a substantial sum if the payments are large or recurring. You may be able to avoid convenience fees by paying with cash or another form of payment.

Frequently Asked Questions: Convenience Fee

This fee is non-refundable. It is applicable to all modes of payment.

Coming out of the pandemic, many restaurants switched to charging a service fee to compensate staff instead of relying on the tip credit. (If you're not aware, tipped employees in many states earn a subminimum wage — a base wage lower than the minimum wage.