Guide On Charging Credit Card Convenience Fees
Charging Credit Card Convenience: Merchants are expensive. It is your mission to make money and increase profits in every way possible.
Your bottom line is at risk. You can achieve long-term success by being concerned about the health of your company. Charging Credit Card Convenience.
The short answer to your question about whether your business can charge convenience fees for credit cards is yes.
There are some things you should know in order to protect your business from financial disaster. Charging Credit Card Convenience. Charging Credit Card Convenience.
What’s a Credit Card Convenience Charge?
The credit card convenience fee, which is charged to the consumer in addition to the due payment, is an additional charge.
This convenience fee is charged to the consumer because the business provides another way for them to pay their bill (other than the usual payment channels).
A card present merchant might accept cash only. Accepting a credit card can be considered convenient for the consumer and may charge a convenience fee. Charging Credit Card Convenience.
Merchants who operate in an exclusive card, not present environment cannot charge a convenience fee for credit cards.
This is because it is not an additional convenience for the consumer. Many third-party collection agencies accept in-person payments, for example. Charging Credit Card Convenience.
They may be able to charge a convenience cost for credit card payments. A third-party agency that refuses to take in-person payments would not be allowed to charge a convenience fee.
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Remember that there are other factors that can also affect whether or not your business is allowed to charge this fee. Let’s look at some of these rules. Charging Credit Card Convenience.
Guidelines for Charging Credit Card Convenience Charges
You can charge convenience fees to credit card users as a merchant in the following situations:
- Visa does not require registration. However, merchants must follow the card brand rules when charging a convenience fee.
- This fee represents a convenience such as telephone or web payments and must be charged for any type of payment made through that channel.
- If your business accepts both credit cards and ACH payments, this means you will have to charge a fee for all telephone and web payments.
- Paying in person (in a card-present environment) does not allow the payment to be charged.
- As a fee for their convenience, the cardholder is made to understand the fee.
- The payment is collected by the business in an environment other than a Card Not Present (CNP).
- The fee is not a percentage of the amount that you pay, but a fixed amount. Charging Credit Card Convenience.
- The fee must be displayed in one transaction or included as part of the total amount.
- Before the payment is made, the consumer must be informed that a convenience fee will be charged for using a credit or debit card. Consumers must be informed before they make the payment that they have the option to cancel it or pay another way.
- Recurring payments may not attract a credit card convenience fee.
- Businesses may be prohibited from charging convenience fees on payments by state or local laws.
- Before implementing a convenience fee, business owners should consult their attorney.
What are the rules for each credit card company?
Yes, each credit card company has its own rules regarding the charging of a convenience fee.
Visa’s rules are the most strict. Merchants who follow the Visa guidelines will be able to satisfy the convenience fee rules for all credit card companies. Charging Credit Card Convenience.
Special Considerations for Collection Agencies
Many consumers pay their bills monthly in installments using recurring transactions, subscriptions, or auto-deduct.
These business types need to remember that Visa rules prohibit convenience fees from being charged to recurring payments within a schedule.
Businesses often collect fees in states other than their own. While it may be legal to charge convenience fees for credit cards in the place you are located, it may not be allowed in the state where your customer resides.
To avoid charging fees to people living in protected states, you need to understand how your payment processor works.
What is a Credit Card Service Charge?
Visa only allows certain merchants to charge what they define as a service fee. This fee is similar in nature to a convenience charge, but it is only allowed to be charged to merchants that are education or government merchants.
Guidelines for charging a credit card service fee
Merchants can charge a fee for credit card usage. The following rules apply with an additional:
- Merchants need to register with Visa
- Only merchants that have specific merchant code codes can charge the service fee, as determined by Visa.
- On transactions made with a card-present or in person, the service fee may be charged.
- Recurring payments may be subject to the service fee.
- When using a third party to charge the fee, Card Not Present (CNP), transactions must be submitted in two separate transactions.
- Based on the amount of the transaction, the fee can be either a flat fee or a percentage.
- Merchants or third-party service providers can charge a service fee.
- Based on the payment method, the fee may be adjusted or changed. You can choose to pay by credit card, debit card, or ACH.
- The payment channel can have an impact on the fee. You can pay online, by phone, or at the point of sale.
The surcharge is just another name for convenience?
No! Surcharges that only apply to credit cards must be established by the company that provides the goods/services.
This registration is required by Visa. Merchants can add a credit card surcharge to consumer payments made with credit cards. This is to pay the merchant service provider’s credit card fees.
Surcharges should also be added to the final amount that the consumer pays. If the $100 surcharge is $5, then the total amount should be $105, and not $100 plus $5.
A surcharge cannot also be used in a Card Not Present-only area, as with many convenience fees.
It is important to understand the difference between a convenience charge and a surcharge. Debit card transactions cannot be subject to surcharges.
Merchants need to be familiar with how payment systems work. Payment systems that cannot distinguish between credit and debit charges can lead to merchants violating surcharge regulations.
You can avoid paying customers improper charges by understanding how your payment system works.
Visa Guidelines for Charging Credit Card Surcharges
You should also be aware of other surcharge rules as a merchant
- The surcharge amount cannot exceed 4% of the transaction amount.
- Any merchant may charge a surcharge, regardless of Merchant Category Code.
- Before making a payment, consumers must be informed of the surcharge.
- Businesses may not be allowed to charge a surcharge for credit card payments under certain laws. Before implementing, business owners should consult their attorney.
- USA cardholders pay no surcharges for Card Present (CP), and Card Not Present(CNP) transactions.
- Each receipt must include a surcharge fee.
Solutions for Zero Cost Processing
There are many options available to merchant service providers (MSPs) when it comes to offering Zero-cost Processing merchant accounts.
PDCflow has partnered up with MSPs to support this fee-based processing model.
PDCflow software gives merchants flexibility. They can use either a standard merchant account or a zero-cost processing account.
This allows businesses to decide when they will charge processing fees to consumers.
Talk to a PDCflow payment expert for more information about your merchant processing options.
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Charging Credit Card Convenience Also Ask
Can I charge a convenience fee for credit cards?
Most merchant credit card agreements prohibit merchants from charging surcharges on transactions. While credit card issuers may not be allowed to charge a surcharge on credit card transactions, they are sometimes permitted to offer a discount for customers who pay with cash.
What is the standard credit card convenience fee?
Convenience fees are charges levied for the privilege of paying for a product or service using an alternative payment, or a payment method that is not standard for the merchant. Average convenience fees are anywhere between 1.3% and 3.5%.