What Is a Convenience Fee?
A convenience fee is a fee charged by a seller when a consumer pays with an electronic payment card as opposed to by a standard form of payment accepted by the business. Standard payments incorporate cash, check, or a Automated Clearing House (ACH) transfer. Convenience fees can be a fixed dollar amount or a percentage of the transaction amount, generally 2% to 3%, and must be revealed to the consumer in advance. Types of payments where the payee commonly charges a convenience fee incorporate mortgage payments, property tax payments, college tuition, and taxes.
Understanding a Convenience Fee
Convenience fees can assist a business with covering a portion of the costs forced through electronic payment processing. Businesses need to pay a merchant fee each time one of their customers utilizes a credit card. For most businesses, for example, department stores and supermarkets, a merchant fee is just a cost of carrying on with work. Then again, a cinema or show setting commonly takes payment in the cinema world, so an alternative payment channel, like the telephone or online through credit card, would bring about extra fees for them, subsequently they would charge a convenience fee for carrying on with work along these lines.
It's important to note that a convenience fee is not the same as a surcharge. A surcharge is the ability to charge extra just for the benefit of utilizing a credit card while a convenience fee is for a specific use, for example, taxes or tuition, or payment through alternative channels, for example, by telephone or online.
Illustration of a Convenience Fee
Assume that you wanted to pay the Internal Revenue Service (IRS) with credit card. The IRS will acknowledge credit card payments through several different payment processing companies, and they all charge convenience fees, as permitted by the credit card companies. One could charge 2.49% with a $3.95 least, while another could charge 3.93% with a $2.00 least. Hence, in the event that you really want to send the IRS $2,000 and you wanted to pay with credit card, you could be required to pay a maximum convenience fee of 0.0393 \u00d7 $2,000 = $78.60.
Convenience Fee Regulations
Certain individuals probably wouldn't fret paying a convenience fee for the benefit of utilizing an electronic payment card, especially if the benefit of earning rewards on the card offsets the cost of the convenience fee. Notwithstanding, this practice is regulated by both state legislation and card organizations. As a regulated act, businesses must be mindful in establishing convenience fees and surcharges for customers.
Surcharges have been banned in 10 states, which are California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas, plus the district of Puerto Rico. These boycotts have come into question as certain courts contend that they limit a business' freedom of discourse. States where surcharges are legally permit merchants the ability to set their own surcharge levels with covers ordinarily at around 4%.
Credit Card Company Policies on Convenience Fees
Each credit card provider has various rules on convenience fees. Some are more intensive than others. Below are the rules of a portion of the major credit card providers:
Mastercard: Allows for convenience fees as long as they utilized for all transactions and methods of payment.
Visa: Allows for convenience fees provided that the payment is through an alternative channel, such a by telephone or online, and the business first informs the consumer, and that the fee is a flat rate, not a percentage of the sale.
American Express: American Express' policy does exclude convenience fees nor surcharges.
Discover: Discover's policy additionally does exclude convenience fees nor surcharges.
The most effective method to Avoid Convenience Fees
There are truly just two options with regards to convenience fees; either to pay the fee or to utilize one more form of payment, like cash. As a rule, a few businesses, for example, gas stations, offer discounts when a consumer pays with cash. It's dependably worth inquiring as to whether they offer a cash discount. Convenience fees are intended to be revealed at the point of sale, so in the event that you discover you have been charged a fee sometime later, it's important to take this up with your credit card company.
- All businesses need to follow the policies of payment processing providers and government laws with regards to convenience fees and surcharges.
- Average situations where convenience fees are charged incorporate payments for taxes and tuition.
- Convenience fees are charged by businesses to cover the cost they pay to payment processing companies for when a customer pays with credit card.
- The fee is commonly a fixed amount or a percentage of the sale.
- A convenience fee is a fee charged by a business for payments made through an alternative channel, as opposed to with cash, check, or ACH.
- A convenience fee is not quite the same as a surcharge, which is a charge essentially for just utilizing a credit card. Surcharges are unlawful in certain states.