07 Aug 2020
Credit card fees provide for easier and more convenient transactions and have become a go-to method of payment for both customers and merchants, especially during the COVID-19 pandemic. However, merchants have long been strapped with Processing fees assessed by credit card processing companies for each credit card transaction run by the merchant. As these processing fees (also called "swipe fees") can be up to 5% of the charge to the credit card, many merchants try to find ways to pass these fees on to the customers. One way merchants, including Self storage facilities, choose to pass processing fees on to cardholders is by charging a similar fee to customers. Many facilities call this fee to customers a convenience fee or a surcharge, but there are distinct differences between convenience fees and surcharges that facilities should be aware.
Convenience fees are not technically related to the use of credit cards, but rather are fees charged to the customer for the use of an alternative payment channel outside of the merchant's usual payment channel, regardless of the type of payment used.
However, if a merchant is not careful, a convenience fee could end up being a surcharge. A surcharge is a specific fee added on by the merchant solely for the use of a credit card.
Important to know is that surcharges are prohibited by State law in various states. At present, Connecticut, Colorado, Kansas, Maine, Massachusetts, and Oklahoma have anti-surcharge laws on the books.
Additionally, surcharges were once banned by the credit card companies themselves; however, this changed in 2013 with a settlement agreement in a class action lawsuit against Visa and MasterCard which now allows merchants to charge fees to customers who use a Visa or Mastercard credit card to make a payment. The other credit card companies followed suit.
The distinction between a convenience fee and surcharge is also important because the credit card companies treat them differently and have different rules for the fees.
It is also important to note that a surcharge on payments made with a debit card or prepaid card is prohibited by Federal law. However, a cash discount program for customers who pay by cash, check or debit card is permitted under Federal law.
Given the complicated nature of charging convenience fees and surcharges, if you wish to start charging such fees, consider consulting with an attorney regarding your state law and your credit card company regarding your intent to do so to ensure that you do not end up violating your agreement with them.
Author: J. Ashley Oblinger Thumbnail: Photo by cottonbro from Pexels
