The Difference Between a Convenience and Surcharge Fee

The Difference Between a Convenience and Surcharge Fee
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As a consumer, it’s likely you’ve paid surcharge or convenience fees. It’s also likely you’ve used these terms interchangeably, and you’re not alone. Yet, contrary to popular belief, a surcharge fee and a convenience fee are two very different charges.

Think about the last time you bought movie or concert tickets. If you purchased these tickets through a third-party website, you probably paid a convenience fee. This is charged for the convenience of using an alternative payment channel, and is typically a flat dollar amount.

Now, think about purchases you’ve made at gas stations or corner stores. Do you remember seeing signs or hearing the cashier say, “Are you willing to pay a fee to use your credit card?” That’s a surcharge fee. It’s a percentage of the total amount that’s charged simply for the privilege of using a credit card. Ultimately, it helps cover the processing fees the business pays to its Merchant Account Provider.

You might wonder, “Is it legal to charge a credit card processing fee?” Not always.

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Convenience and Surcharge Fee Legalities

Businesses are allowed to charge surcharge or convenience fees, but it’s not a free-for-all. Convenience fees are legal only if they’re charged for a truly convenient payment channel that is secondary to the standard offering. For example, an e-commerce business — whose usual payment channel is online or over the phone — should not charge a convenience fee.

Until 2013, major credit card brands had a ban on surcharging. However, due to a class-action lawsuit, Visa and MasterCard ended their no-surcharge policy. Soon after, American Express and Discover followed suit.

Despite this major industry change, the legal parameters around surcharging do vary by location. On July 19, 2017 the United Kingdom banned surcharging entirely, dubbing them a ‘rip off.’

In the United States, surcharging laws vary by state: some have no laws prohibiting surcharging, whereas others ban businesses from charging it. This Visa website provides additional details on surcharging restrictions in certain states.

If a business can legally surcharge in its state or country, there are four rules to follow:

  1. Give ample notification: Businesses that choose to surcharge must notify Visa, MasterCard and their Merchant Account Provider’s acquiring bank at least 30 days before they start charging a surcharge fee.
  2. Don’t exceed the limit: In 2013, retailers were given the green light to add on a surcharge of up to 4 percent to bills paid by credit card. But there is a catch — a surcharge fee must be equal to or less than the average percentage rate the business pays per transaction, and cannot exceed 4 percent.
  3. Only apply it to credit cards: A surcharge fee can only be applied to credit cards, not debit or prepaid cards.
  4. Disclose the surcharge to customers: Businesses must disclose any surcharges to customers at their business entrance, at the point-of-sale (a.k.a the register or website) and on every receipt.

Should Businesses Charge a Surcharge Fee?

As a business owner, surcharging may seem like an obvious choice. With the ability to offset fees, why wouldn’t you charge a surcharge? Unfortunately, opting to pass your credit card processing fees to your customers means higher overall costs for them.

Adding a surcharge to credit card transactions may put your costs above your competitors', giving them an advantage over your business. You should consider how your competitors and industry as a whole handle surcharging.

Of course, there is no clear answer here. As long as your business abides by the law, and you adequately weigh the pros and cons of surcharging, you’ll make the best decision for your business.

Learn how MCC and SIC codes affect processing rates.


Whether you’re a business owner or consumer, we’d love to hear your opinion on surcharging. Do you think it’s fair for businesses to apply a surcharge or convenience fee? What type of businesses have surcharged you? Tell us in the comments section below!

About Author
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Ursula Librizzi

Ursula is the sales and marketing operations manager for PayJunction. She oversees daily marketing tasks and liaises between the sales and marketing departments.

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