Convenience Fees and Surcharge Rules

We get a lot of questions surrounding the ability for merchants to charge their customers a surcharge or convenience fee for accepting credit cards. This post will attempt to provide a thorough overview of when convenience fees can be charged according to card regulations.  We have also included excerpts from Visa, MasterCard, Discover, and American Express of the specific rules that govern the application of convenience fees.  And if you are really interested and want nighttime reading, we have also included links to the complete operating regulations of these card brands here.

Here are the important points you need to know. The words “convenience fee” and “surcharge” are used interchangeably.

  • A convenience fee cannot be assessed in a face-to-face environment
  • A convenience fee cannot be assessed for recurring payments. The convenience fee was designed for one-time payments and not for payments in which a cardholder allows his credit card to be periodically charged for recurring goods or services. Examples of recurring charges include, but are not limited to, insurance premiums, subscriptions, Internet service provider monthly fees, membership dues, and utility charges.
  • The merchant must provide a true “convenience” in the form of an alternative payment channel outside the merchant’s customary face-to-face payment channels, and the fee must be disclosed by the merchant to the cardholder as a charge for the alternative payment channel convenience that is provided.
  • The convenience fee must be disclosed prior to the completion of the transaction, and the cardholder must be given the option to cancel the transaction if not wanting to pay the fee.
  • The convenience fee must be included in the total amount of the transaction; it cannot be “split” out from the transaction amount.
  • If a convenience fee is assessed it must be for all payments (V, MC, Discover, AMEX, ACH, Check) within a particular payment channel (mail, phone, internet).
  • Since all convenience fees are required to be assessed equally, a merchant who accepts Visa is restricted to a flat convenience fee for all cards.

Let us know if you have any questions or if your understanding is different. Read the rest of the article here.


  • A convenience feee can be charged in a face to face situation for government entities and secondary education.

  • Thanks for the update Gene. Starting November 2007, MasterCard decided to allow governments to charge a convenience fee to customers who pay by credit card in face-to-face transactions and American Express adopted a similar policy in January 2008. MasterCard’s rules around this change can be found here.

    Since Visa and Discover still have not followed suit with this change and since MasterCard and American Express will not allow a convenience fee to be assessed on their brands and not on Visa and Discover Cards, the practical implication is that government entities that want to charge a convenience in face to face transaction must only accept MasterCard and/or American Express. In other words, if a government accepts Visa cards, then it cannot charge a convenience fee on any credit card in face-to-face transactions.

  • Mukesh Patel

    Has Visa changed it’s policy now to allow for a convenience fee on a face to face government transaction?

    • Thank you for the question Mukesh! Visa does allow a “service fee” to be charged on face-to-face tax payments (only MCC 9311 – Tax Payments) as a percentage of the transaction. The Visa Tax Payment requires registration and the Service Fee must be a separate transaction.

      A key component of the program is that the convenience fee be automatically calculated prior to authorization and then submitted and processed as a separate transaction from the fees or taxes being paid. Any Town, City or County that wants to assess a fee back on credit card transactions, regardless of whether it is online, over the phone, in the mail or in person must meet these requirements and must be registered with Visa.

      Moreover, Visa requires a special convenience fee rate on their consumer debit cards for Tax Payments not to exceed $3.95. Percentage based fees on Visa consumer debit cards or fixed rate fees greater than $3.95 are prohibited. Government entities can utilize BIN (Bank Identification Number) file management so that Visa consumer debit cards are automatically identified on tax transactions and the $3.95 fee is automatically substituted prior to authorization. Read our other post to learn more about BIN file management

  • John Schooley

    So who goes punished when say utility companies (municipal gov’t run) allow for convenience fee %0 or in fact take a convneience fee front counter face to face? Or how about the many, many utility companies that take on long e-check say $1.95 and the convenince fee is say eith 3.25% or $3.95
    Seems to me the regulators, authorities, merchant service banks are looking the other way and so is VISA

    • anandkgoel

      As you may know, Visa/MC introduce new interchange categories and new schemes like allowing merchants to charge of convenience fees because they want to get new industries to adopt acceptance of credit/debit cards. As you suggest, there is a legitimate debate that could be had about the overall “value” delivered to consumers who are paying the convenience fee.

      However, keep in mind that many utilities and municipal governments have to recognize/record 100% of revenue and they collect from their customers. Either by law or budget constraints they cannot pay credit card processing fees and therefore, have to charge convenience fees to offset merchant services fees.

      • anandkgoel

        Alex, your understanding is correct on the first part of your question – process two separate transactions whereby the credit card processing fee is offset by the convenience fee. The second part of the question relates to the split of the convenience fee between the 3rd party and merchant…the split depends on what is negotiated between the two parties.

        here are the salient points for Visa tax payments:

        *Visa Tax Payment Program rules apply to the payment of personal income, real estate property, other personal property, unemployment, sales/use and business income taxes.
        *Fee can be percentage-based fee
        *Fee can be separated into a second transaction
        *Convenience fee must be the same for all other non-Visa credit card products (MC, Amex, Discover)
        *Different fee can be charged for ACH transactions and Debit (capped at $3.95 for Visa Debit card)
        *Fee can be collected by a third party service or company
        *Fee can be collected in a Retail (face-to-face) environment.

  • Donovan

    If a municipal government uses a third party service provider for online payments including Visa transactions, can the third party provider seperate out the convenience fee from the principal and deposit only the principal into the cities bank account?

    • anandkgoel

      Donovan, the scenario you suggest works for tax payments where two transactions can be run – the first transaction is for the tax amount and goes into the taxing authority’s account the secondary transaction is run for the convenience fee and can be deposited into the third party’s account.

      For any non-tax payment, a single transaction must be run that combines both the original amount and the convenience fee. There are ways to manage this process so that the principal amount is deposited into the City’s account the secondary amount is deposited into the third party’s account. Let me know if you would like any additional insight.

  • sandra farah

    I am urgently seeking information on VISA’s convenience fee regulations. We have a university wanting permission to charge a percentage-based convenience fee. According to the documentation I can access of VISA’s regulations, only a flat rate fee is permitted. I do recall having received permission from VISA in the past for a merchant to charge a percentage-based convenience fee. MasterCard regulations do allow for a percentage-based convenience fee, and I am hoping VISA does as well.

  • Regarding non-tax payment where a single transaction must be run that combines both the original amount and the convenience fee…if the cardholder pays in a single transaction and it appears on their statement as a single transaction, can the third party have a secondary account where the fee is deposited? I assume this is a function of the third party software. What other ways are there to do this? Thanks!

    • anandkgoel

      what we have seen more often is the third party and merchant setting up a custodial account, whereby, the proceeds from the single transaction are deposited into a single custodial account and from there, the third party can take its fee and the remaining funds are swept into a merchant account.

  • Debbie

    Are private elementary and secondary schools allowed to charge a convenience for Visa transactions?

    • anandkgoel

      yes. here are some general guidelines…

      Must provide a true “convenience” in the form of an alternate payment channel
      Fee is designed for one-time payments only
      Fee cannot be applied to recurring payments
      Fee must be a flat fee
      Fee must be equally assessed to all payment types in the same channel
      Fee must be included in the total amount of the transaction: it cannot be split out from the payment
      Fee must be assessed by the same merchant actually providing the goods or services
      Fee cannot be collected in a Retail (face-to-face) environment.

  • Chazz

    my question is…Is it legal for my apartments to charge a fee of $12.95 to pay with credit card online? It is not just a one time fee, if I pay online any other time again I will have to pay it again.

    • anandkgoel

      It is perfectly legal for an apartment to charge a convenience fee if you pay via credit card online. Apartments typically haven’t accepted credit cards due to processing fees. Now, some apartments accept cards because they can charge a convenience fee for truly providing a “convenience” to renters.

      You can avoid this fee altogether by dropping off a check to the apartment office.

  • WE are currently running advertising on many radio stations. Have currently started on a new station and will have monthly billing. Went to pay with a Credit card & answer was that a 2.5% charge will be added to each transaction as a convenience fee?

    Is this legal?

    Please advise.


    • anandkgoel


      Visa regulations prohibit a merchant from charging a convenience on recurring transactions. So a merchant can charge a convenience on recurring transactions if they do not accept Visa. Moreover, the radio station has to charge the same convenience fee for all the payments (credit card, debit card, ACH) that are accepted via the “convenience” channel (i.e. web, phone, etc.).

      In terms of being being “legal”….there are no laws that govern convenience fees, outside of a few industries like insurance. There are only card association (Visa, MasterCard, AmEx, and Discover) regulations. If the merchant isn’t following the regulations, you can inform the merchant and inform the bank that issued your credit card. At the end of the day, if you don’t want to pay a convenience fee send the radio station a check.

  • Tommy McDonald

    I am a General Manager for a Water District in Texas. We are reviewing the rules on a local governments legality to assess a convenient fee to make the transaction revenue neutral. After reading various rules it appears that if a customers logs on to the District’s website/a third party website or uses a phone to pay the water bill with a credit card it is OK to assess a convenient fee. Is it legal in a face to face transaction with VISA MC and Discover to assess a convenient fee?
    The bills customers are paying will be for water and sewer gallonage, a water and sewer base fee, and any late fees or penalties ect.

    Please help!
    Tommy McDonald
    JCWCID 10

    • anandkgoel

      Keep in mind that a convenience fee is applied for all payment “tender” accepted within a channel. So if you are only accepting credit/debit cards via web/phone then you are fine to charge a convenience fee. However, if you accept e-check via the web then you have to apply the same convenience fee to the e-check.

      For the Utility vertical, Visa does not allow a convenience fee for face to face transactions. However, if you do not accept Visa then you can charge a convenience for face to face transactions. Again, you have to charge the same convenience fee if anyone pays by check in a face to face environment. You may limit cards to web/phone and redirect face to face customers to these channels.

  • Steve

    I am an Agent/ISO with a merchant who is a 501c3 who wants to charge a convenience fee for web based transaction for their summer camp. They do make ACH transactions available via their site and people can certainly mail or walk in with a check. It’s my understanding that since they want to accept both Visa and MC that they’ll have to bill a flat $ amount for the fee.

    My request is a solution or a company I can partner with to make this happen for them. Please let me know what companies out there offer these programs through their Agent/ISO channel and if I’m wrong or missing anything in the scenario that I’d need to know.

    Thank you!

    • anandkgoel

      Your understanding is correct in that the convenience fee must be a flat amount if the merchant wants to accept Visa. Most of the large acquirers like Elavon have a solution whereby they can facilitate the convenience on your behalf. I also know they have a strong ISO channel.

  • Just Wondering

    Is it legal for a Bill Collecting Agency to charge $12.00 Service Fee every time a payment is made via credit/debit card? Or the same fee if it’s an ACH Debit as well? NCO Financial told me that they charge $12.00 whenever a payment is made over phone or internet. That seems a bit high though. They said it was because it was a hospital bill. They don’t charge like that for Cell Phone Bills though.

    • anandkgoel

      Yes, it is legal. Card association rules state that a merchant or third party facilitating a payment on behalf of a merchant must assess the same convenience fee to all payment tenders for a given channel where a convenience fee is implemented. In order to avoid the convenience you can simply through another channel where a convenience fee is not assessed (e.g. mailing in a check).

  • Jared

    Visa says that the convenience fee must be “A flat or fixed amount, regardless of the value of the payment due.”
    So my question is…can this fee be a fixed percentage? Meaning that whether the payment is $5.00 or $500.00, I’m going to assess the same 3% to both payments. Or does the flat or fixed amount mean a fixed dollar amount like $2 no matter how small or large the payment is?

    • anandkgoel

      If you accept Visa then you can only assess a flat dollar amount (not a flat percentage amount) convenience fee regardless of the amount paid by the customer. However, if you do not accept Visa then you can assess a percentage rate like 3% on MasterCard, Discover and American Express payments. Visa tends to be the most restrictive when it comes to convenience fee rules. Visa has a few exceptions like tax and education payments.

  • AtlantaMan


    I work with a 3rd party processor in the utility space, and we were recently told that starting April 1, Visa is disallowing any fee of any sort, whats-so-ever, on any payment, regardless of payment channel (Face to face, web, phone, etc) if the purchase falls under the utility rate.

    So as a third party utility partner, we will have to switch to the much more expensive retail rate if we wish to continue charging the ~$3.95 per payment that helps us stay in business.

    Do you have any insight? Is this true? Are the rules for the utility rate changing so dramatically?

    • anandkgoel

      Actually, Visa always publicly stated that in order for a merchant or third party to qualify for the Visa Utility rate, a convenience fee couldn’t be charged. And if a convenience fee was charged, then the higher CPS rates would apply. So it seems that Visa is going to enforce a rule that they already had on the books.

  • Pete G

    I understand certain states do not allow convenience fees to be charged
    I have been using my card to pay for certain advertising to a company in Texas and after 6 or 7 payments they suddenly charged 3.5% fee on top of the $2200 I authorized.
    I called Visa and it was suggested that there are certain states that do not allow this, and that the merchant is allowed to use a flat fee only.
    Is my understanding correct?

    • anandkgoel

      Some States do restrict usage of convenience fees often times when it relates to insurance products. We haven’t seen many restrictions outside of insurance. However, Visa has specific rules that govern when and how merchants can charge convenience fees. In your specific case, the merchant is allowed only to charge a flat fee, not a percentage amount. The merchant may not be aware of this rule. You can talk to the merchant but if needed, contact your Visa card issuer. You may need to talk to the manager at Visa because the service representative may not be knowledgeable.

      3.5% seems high…the most expensive Visa card processing fees are around 2.85%. You can refer the merchant contact to us and we can point to the specific rules at Visa.

  • awcart

    Does this apply only to B2C sales or are these rules applicable for B2B transactions as well?

  • Tony

    We do NOT accept credit card payments for rent; however, we DO allow payments to be made online via ACH from a checking or savings account…with that, can we charge a convenience fee on recurring ACH payments since credit cards are not accepted on-line? Do we have to abide by the credit card rules since they are not an accepted form of payment?

    • Since you do not accept card payments, you are not bound by the card network rules. You could charge a convenience fee for recurring ACH payments but why would you? Since ACH payments are so inexpensive (less than $0.40 per transaction and significantly lower for higher volume of ACHs), I cannot recall any firms charging for ACH payments alone. I would imagine that it is more costly for you to accept paper checks (time to collect and deposit checks) that you would want to encourage recurring ACH payments.

  • Vanessa

    My ex employer has been charging a 3% fee for all types of transactions(face to face included) in Florida which would make it illegal is there a government agency were I can report this?

    • As part of the settlement between the card networks (Visa and MasterCard) and merchants last year, all merchants are allowed by charge a surcharge to customer who pay via a credit card. Read more here – Merchants have to follow specific rules when implementing these surcharges.

      Most competitive marketplaces like retail stores, travel and healthcare will not be able to support surcharges. Moreover, there are 10 States that do not allow surcharging. With exception of these 10 States, violations to surcharge rules are managed by the card networks and not by any government entity.

  • Sandra Andrade

    Roscoe took over in managing WESTGATE APARTMENTS in Houston, TX and recently added 2 new ways to pay rent (Online checking account or MoneyGram), in addition to paying check or money order in the leasing office. However NOW if you want to pay them to the office directly (check or money order) they will add a $35 “convenience fee”. Convenience for what? Not mine. I cannot be forced to provide my banking information nor to spend more money to buy a Money Gram. I should be charging Roscoe for making it convenient to them by depositing to their account directly because it will cost me more money! NOTE: My contract has NOT expired and in the middle of it they intend to change my normal payment method. They claim they have full right since they sent out a “flyer” with the notice of this change. Really? A flyer? A flyer overrides our contract?

    • This issue doesn’t deal with credit cards so it out of our realm. Typically, private businesses can change payment terms…but they have to give you notice. I would suggest that you request Roscoe honor the original rental agreement before you accept the new payment terms. If they don’t agree you can either consult a lawyer or find a better apartment.

  • With new state laws and changes in the rules by the merchant services providers, do you have updated information to share regarding convenience fees and surcharge rules?

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