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A Detailed Guide to Convenience Fee vs Surcharge!

When it comes to payment processing, there are two terms that can often cause confusion: convenience fees and surcharges. While both of these fees involve additional charges for customers, they are actually quite different. In this article, we will provide a detailed guide to convenience fees vs surcharges, including their definitions, regulations, and best practices for businesses.

What is a Convenience Fee?

A convenience fee is a charge that businesses can add to a customer's payment to cover the cost of processing the payment. It is typically added when a customer chooses to use a payment method that is more costly for the business to process than other payment methods. Some common examples of payment methods that may incur a convenience fee include:

  • Credit card payments
  • Debit card payments
  • Online payments
  • Phone payments

Here are some key points to keep in mind regarding convenience fees:

  • Convenience fees are legal, but they must be disclosed to customers before they make their payment.
  • The fee must be a flat fee or a percentage of the transaction amount, and it must be reasonable.
  • Businesses cannot charge a convenience fee for payments made with cash or check.

What is a Surcharge?
A surcharge is a fee that businesses can add to a customer's payment to cover the cost of processing the payment. However, unlike a convenience fee, a surcharge is specifically added to payments made with credit cards. Some common examples of businesses that may charge a credit card surcharge include:
 

  • Gas stations
  • Airlines
  • Hotels
  • Online retailers

 
Here are some key points to keep in mind regarding surcharges:
 

  • Surcharges are legal in some states, but they are prohibited in others.
  • If surcharges are allowed in a state, they must be disclosed to customers before they make their payment.
  • The fee must be a flat fee or a percentage of the transaction amount, and it must be reasonable.
  • Businesses cannot charge a surcharge for payments made with debit cards or prepaid cards.

Best Practices for Businesses
If you are a business owner, here are some best practices to keep in mind when it comes to convenience fees and surcharges:
 

  • Always disclose the fee to your customers before they make their payment.
  • Make sure the fee is reasonable and does not exceed the cost of processing the payment.
  • Consider offering discounts for payments made with cash or check to encourage customers to use those payment methods.
  • If you are charging a surcharge, make sure it complies with state regulations.

 
In conclusion, convenience fees and surcharges are two different types of fees that businesses can use to cover the cost of processing payments. While they are legal in some states, it is important for businesses to follow state regulations and best practices to ensure that customers are not unfairly charged. By being transparent and reasonable with your fees, you can maintain good relationships with your customers and keep your payment processing costs under control.