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Convenience Fee – Protecting Merchant Margins

Consumers want to choose how to pay and with whatever card they want. All that convenience comes at an expense to merchants.  Every time you accept a card, there are fees.  Each card transaction includes assessment, interchange, and transaction fees.  One way to combat ever-increasing processing fees is to add a convenience fee to each sale.

What is a Convenience Fee?

The most common type of credit card transaction fee is the convenience fee. This fee is charged when a customer uses a credit card to make purchases rather than using cash or checks. It’s usually added on top of the purchase price and is typically between 1% and 3% . A  merchant can charge a customer a convenience fee for paying in a manner that’s not standard for the business (for example, by mail or over the phone with a credit card).

  • A convenience fee is different  than a service fee or surcharge.
  • A service fee is only for certain types of education and government merchants.
  • A surcharge is a fee to cover credit card fees associated with a processing a transaction.

Convenience Fess are Legal

In the United States, credit card convenience fees are legal. But they have to be a flat fee (say, $2 per transaction) rather than a percentage of the transaction amount (such as 2% of the total). A merchant can also charge service fees, which are convenience fees just for education or government entities, and they can be either a flat fee or a percentage of the transaction.[1]

Convenience Fee Impact on Margin – $100 Purchase Example


The Need to Communicate

There is no question that merchants can boost their margins by adding a convenience fee.

At this point, you might be thinking, won’t adding a convenience fee alienate customers, or reduce sales?  The answer is probably not.  Consumers prefer the convenience and will pay for it.  Research by Epsilon, a market research firm surveyed Amazon customers and found that 60% of consumers cite free shipping, and 52% cite convenience as a reason for buying on Amazon.

Further, government, education, utilities, and online ticketing organizations have acclimated consumers to paying fees for using convenient alternative methods to pay.

Finally, merchants in other industries use fees to cover processing costs. Gas stations have cash and credit prices.  Insurance companies charge a fee for recurring payments that varies by payment type.  And purchasing your weekly groceries online costs more than shopping yourself.  At the end of the day,  you and I are still being charged more for the convenience of shopping remotely and using plastic.

Consumers Don’t Understand the Cost of Credit

As mentioned earlier consumers have no idea that the merchant pays fees for each transaction; and a small number of consumers will push back on being charged a fee. Before adding a the fee, communication with your customers is essential. Credit rules require that consumers need to be made aware that a fee will be charged at the point of sale and that free payment options are available, such as paying in-person or by mail.

The ways to reach out to consumers vary by business and industry, whether it’s a notification in an invoice, a mention on the website, newsletter, etc. the better you can relate your story the less friction you will experience at the point-of-sale.

Convenience Fee Rules and Regulations

Card brands (Visa, Mastercard, etc.) or card association rules permit merchants to charge convenience fees under conditions. Merchants need to comply with these rules to remain within the terms of their merchant agreement to continue to accept credit cards.   Here are the key points:

  • Convenience fees are permitted when the payment channel is an alternative payment method to the method typically used by the merchant or industry.
  • A convenience fee is a flat fee, and that is charged equally across all debit or credit card transactions no matter how large the transaction or the brand of the card used.
  • Consumers must have notice that a convenience fee will be charged and agree to it before the transaction groceries.
  • Cannot be charged on card-present transactions
  • For government or educational institutions, a convenience fee is called a service fee and is limited to a select group of MCCs or merchants’ numbers.

Although convenience fees are not illegal nationally, local laws may affect how a merchant can add a convenience fee to their credit and debit card transactions.

Alternative Strategy

Wary your customer won’t like a convenience fee? Another way to offset processing costs is to set a minimum transaction amount for credit card transactions.  The minimum transaction amount can be no more than a $10. While you are not required to disclose minimum purchases, we recommend it.


For merchants, taking card payments is a fact of life; paying all of the processing costs doesn’t have to be.  To optimize your convenience fee program and remain compliant, merchants need an experienced fee-based payment partner like IntelliPay.  The IntelliPay suite makes it easy to set up and customize a program to the needs of your business.   For more information, contact IntelliPay at 855-872-6632.