What is a convenience fee?

A convenience fee is a flat fee added to the cost of a transaction that a cardholder is asked to pay.  For example, a merchant may charge a convenience fee of $5 per charge/credit card transaction regardless of the total cost. 

Are surcharges and convenience fees legal?

As a result of a settlement between a class of retailers and the brands (Visa/MasterCard), on January 27, 2013, merchants in the United States and U.S. Territories will be permitted to impose a surcharge on cardholders when a charge/credit card is used.  However, surcharges are prohibited in many states by state law.  

What is a Surcharge?

Surcharges are fees that a retailer adds to the cost of a purchase when a customer uses a charge/credit card.  A surcharge is a percentage of the value of the sale.  For example, if a cardholder purchases $100 in office supplies, a merchant may add a surcharge of 3% to the total purchase.  There are specific brand (Visa/MasterCard) rules regarding surcharges.  For more information on surcharges, please visit:



Which states are prohibited from charging surcharges?

There are States that prohibit surcharges on charge card transactions.  Therefore, even though Visa and MasterCard will be eliminating the prohibition against credit card surcharges, merchants in those ten states are unable to impose credit card surcharges since they are illegal under state law.  Unless those laws are changed, merchants in those ten states are still barred from imposing credit card surcharges.

Does the ability to surcharge apply to merchants globally?

No. The settlement agreement impacts the rules related to the surcharging of credit card purchases made in the U.S. and U.S. territories only. Surcharging remains prohibited outside the U.S. unless there is a local law or variance that requires merchants be permitted to engage in the practice.

Surcharges and services fees are allowable in New Zealand, Australia and the UK:

If a cardholder is charged a surcharge fee, what action should the cardholder take?

A legal surcharge assessed when conducting official business is reimbursable as a miscellaneous expense on your voucher (FTR Part 301-12).  The FTR does not list every miscellaneous expense that a traveler might have and which are authorized or approved by the agency.  For example:  M&IE is $34.50 for day 1 and then the surcharge for one meal is $2 (listed as a separate line item).  The same goes for hotels:  $120 per night; $15 taxes and $12 surcharge - all listed out separately.

If the surcharge is illegal, the cardholder should dispute the surcharge amount with the bank directly.

Why would a merchant try to charge customers fees or require minimum purchase amounts?

Typically, a merchant will charge fees or require minimum purchase amounts to cover the cost of interchange.  Interchange is a fee paid by the merchant’s bank to the card issuing bank for processing the credit card transaction.  This fee is generally a percentage of the total transaction amount and is passed on to the merchant through the merchant bank’s fees.

What is required for merchants charging surcharges?

Prior to imposing a credit card surcharge, merchants must provide a 30-day written notice to Visa and/or MasterCard and their credit card banks or processors of their intent to add a surcharge.  For  merchants who accept Visa cards, the notification form can be found and submitted by going to www.visa.com/merchantsurcharging.  For merchants who accept MasterCard, please go to https://www.mastercard.us/en-us/business/overview/support/merchant-surcharge-rules.html to post the 30-day notice.  After notifying Visa and MasterCard, merchants should notify their bank or financial institution that processes credit cards of intent to impose a surcharge.

Each merchant will have to make a decision regarding how the imposition of a surcharge may impact its consumers and the competitive position of the merchant in its market.  Merchants will also have to decide whether to apply the surcharge only on certain items, like cash advances, or whether to impose it across the board.  Each merchant will have to make its own business decision regarding the use of surcharges.

Can a surcharge be imposed on debit or prepaid cards? 

No.  The surcharge may only be imposed upon credit cards, and not debit or prepaid cards.  The amount of the surcharge may not exceed the amount of the swipe fee paid by the merchant on the particular credit card.  Therefore, merchants will need to know how much a swipe fee is on each card if they intend to fully recoup the full amount of the swipe fee.

When is the surcharge applied?

The surcharge is applied before taxes (when applicable for government charge cards).

Will an account holder know that there will be a surcharge?

Yes.  A merchant that decides to impose surcharges must post a notice of the surcharge at the point of entry into the place of business, at the point of sale, and on the receipt given to the consumer.  Online merchants must post the notice on their websites.  The notice of the surcharge must be printed on the receipt.  The receipt must also itemize the dollar amount of the surcharge.