Definition and Examples of Convenience Fees for Credit Cards
Convenience fees are charges imposed by companies on customers who use credit cards through a specific payment channel instead of the company’s standard payment channel. For example, a company that usually accepts personal checks may charge an additional fee for online credit card payments.
How Do Credit Card Convenience Fees Work?
Although credit card convenience fees can be an annoyance and an additional expense for consumers, companies that impose the fees typically have a legitimate financial reason for doing so. Credit card processors, issuers, and networks charge fees for every transaction that companies make. These fees can range from 2.87%-4.35% on average, according to the payment processor Square. Businesses may have to pay for software and hardware to process credit cards, along with management and accounting costs as well.
Convenience Fees vs. Surcharge Fees
The terms credit card convenience fees and surcharge fees are often used interchangeably, but they are not the same. Surcharge fees are charges imposed on customers simply for using a credit card. Most credit card agreements prohibit merchants from imposing surcharge fees on transactions.
Card Network Rules for Convenience Fees
Merchants who accept credit cards are bound by the agreements they enter into with credit card networks such as Visa, Mastercard, American Express, and Discover. These agreements outline the various things that merchants can and cannot do when accepting credit card payments. The networks vary in their rules regarding whether merchants are allowed to impose convenience fees.
How to Avoid Convenience Fees
You can avoid convenience fees by choosing an alternative payment channel. For example, if a company charges a convenience fee for online payments, you may need to make the payment over the phone, by mail, or in person to avoid paying the fee. Another option to avoid the fees is to check if the company waives fees for members of a loyalty club. The AMC cinema chain charges a convenience fee for online ticket bookings, but you can avoid it by becoming a paid member of the AMC Stubs loyalty club.
Key Takeaways
Companies impose convenience fees on consumers who use an alternative payment channel such as online or phone payments. Convenience fees are regulated by credit card networks and allow companies to pass payment processing costs onto consumers. Surcharge fees are a different type of fee and are specifically imposed on credit card payments. Convenience fees can be charged on any payment method a company receives through an alternative payment channel. You can typically avoid convenience fees by paying through a checking account.
Sources:
– Square. “Credit Card Processing Fees and Rates Explained.”
Source: https://www.thebalancemoney.com/can-businesses-charge-a-credit-card-convenience-fee-4155333
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