At least once a month I get a call from someone stating that they don’t understand what a convenience fee is vs. a surcharge fee.

Convenience Fees are only allowed on Card Not Present Transactions. Now what does that mean?  What that means is you are offering a convenience for a customer to make a payment without coming into the store. Some examples of this would be phone payments and online payments. Also you need to make sure that the convenience fee is a fixed amount regardless of the value due. You cannot charge a convenience fee for recurring payments.

Surcharges are a bit different. It is important to know if surcharges are even legal in your state. The following 10 states it is illegal to charge surcharges.

California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas.

Now what is a surcharge? Surcharges are fees that a retailer adds to the cost of a purchase when a customer uses a charge/credit card.  A surcharge is a percentage of the value of the sale.  For example, if a cardholder purchases $50 worth of Starbucks coffee, a merchant may add a surcharge of 3% to the total purchase. Surcharges are more to recoup your Visa and MasterCard Fees.

Be sure to check with MasterCard and Visa to get familiar with caps on surcharges.  Do your research on this because the fines and penalties can be pretty hefty.

Also make sure you are disclosing your charges as much as you can. Ex at a pay window if you are charging a surcharge make sure you have signs. If you have customers going to the site have it stand out and maybe don’t even allow them to make a payment without them agreeing to the terms and conditions. The more “backup” you have that the customers are aware, the better it will be in the long run.