IMPORTANT NOTE: This section is intended only to be used as a high-level overview and guideline for surcharging and convenience fees. The merchant is responsible to verify and stay up to date on the requirements as they may differ depending on location, specific agreements, or change over time.
Surcharging vs. Convenience Fee
- Surcharge: a fee charged to recoup some of the costs associated with running a credit card transaction.
- Convenience Fee: a fee you charge your customer for the convenience of paying a certain way (online).
- Note: this is about the channel used rather than the method used for payment (credit card or ACH transfer), so it's only allowed on Card Not Present transactions.
Surcharging Rules
- The fee is a percentage of the sale, capped at your cost to accept the card, or as set by merchant agreements, whichever is lower.
- As of 1/3/2024, card brands have set a maximum of 3%.
- Example: If your processing rate is 2.5%, then you can only apply a surcharge of 2.5%. If your processing rate is 4%, you can only apply a surcharge of 3% (the card brand maximum).
- Surcharges can be applied only to credit cards. A surcharge cannot legally be applied to a debit card, even if that card is being run as credit.
- Because the type of card being used in EBMS isn't known until the card has been inserted, EBMS will display the surcharge amount if enabled. However, if the card is then detected to be a debit card, the surcharge will be removed and not charged.
- Competing brands should be surcharged if the contract allows.
- In other words, if you apply a surcharge to Visa, you must also apply a surcharge to Mastercard unless you have a specific agreement with Mastercard that prevents you from surcharging them.
- Disclosure of your surcharge policy must be displayed in two places: at the point of sale (or on the checkout page), and another prominent, frequently seen place within your business (like the main entrance).
- The merchant must provide 30 days' notice to card network and acquiring bank before starting to surcharge. Merchants must complete registration directly with each of the card brands.
- Visa: Koble (and thereby Visa) will be notified when you enable Surcharging in EBMS.
- Mastercard: Fill out the form here: https://www.mastercard.us/en-us/surcharge-disclosure-webform.html
- Acquirer/Processor Name: Worldpay
- Type of Surcharge: Brand
- American Express: No registration required.
- Discover: No registration required.
- Be mindful of state and local laws.
- For example, as of 1/3/2024, Colorado limits to a 2% surcharge cap, and as of 4/15/2023, Connecticut, Maine, Massachusetts, Oklahoma, and Puerto Rico do not allow surcharging at all.
- The surcharge must be listed on the receipt as a separate line and be clearly labeled as a surcharge.
- EBMS will take care of this for you if you print the receipt from EBMS.
Convenience Fee Rules
Convenience Fees:
- Are only allowed for card-not-present transaction types, such as online, phone, or mail order.
- Generally must be a flat amount regardless of the transaction amount.
- Note: Visa requires it to be a flat amount (some exceptions apply). Mastercard, American Express, and Discover do allow it to be set as a percentage of the transaction amount. However, Mastercard requires that payment methods be treated equally, so if you accept Visa, you must charge the same flat amount for Mastercard.
- Must be charged as a bona fide convenience, not just for accepting credit cards.
- Must be disclosed to the customer before completion of a transaction.
- You must allow cardholders to cancel the transaction upon reading the disclosure.
- Cannot be applied to recurring, subscription, or installment transactions.
- Cannot be charged if you are solely an online merchant (if you are, then consider a surcharge).
- Cannot charge both a convenience fee and a surcharge.