In most cases, credit card processing fees will run between 1.5% to 4% of the total value of a transaction. A $1,000 transaction, therefore, could have fees ranging from $15 up to $40. The overall impact depends on your margins.
In most cases, yes—it's legal to surcharge credit cards. According to federal law, there's a 4% maximum allowable surcharge on credit card transactions. Debit card surcharging is illegal in all 50 states.
Imagine a business that accepts credit card payments for online bill payments. Credit card companies charge the business a small percentage of each transaction as a processing fee. The business adds a convenience fee to offset this cost, typically 2-3% of the transaction amount.
In addition, the amount of the convenience fee must be a flat rate; it cannot change based on the total payment due. And remember: you must make it clear to the customer that the extra charge is for the convenience of using a different payment method.
Convenience fees can be a fixed dollar amount or a percentage of the transaction amount, usually 2% to 3%, and must be disclosed to the consumer in advance. Types of payments where the payee typically charges a convenience fee include mortgage payments, property tax payments, college tuition, and taxes.
Q: Are there any states where credit card surcharging is prohibited? Yes, as of the latest updates, credit card surcharging is prohibited in Massachusetts, Connecticut, and Puerto Rico. Merchants must stay informed of changing laws to ensure compliance.
In order to calculate a 3% processing fee, you will have to multiply the whole transaction value by 0.03. For instance, the processing fee would be $3 (100 x 0.03 = 3) if the transaction value was $100.
A nominal fee is charged for payment through credit card, debit card and Netbanking to cover the cost of processing payments.
A convenience fee is levied by a merchant for offering customers the privilege of paying with an alternative non-standard payment method. Merchants can process convenience fees in all 50 states. A surcharge is levied by a merchant for customer purchases made with a credit card.
Use a different payment method.
Merchants often charge convenience fees or surcharges when credit cards aren't a standard payment method. If you have a rent, utility or tax bill, consider paying by check or electronic transfer instead.
There are a few ways of legally passing on credit card fees to customers. Some are direct, and some are indirect. Adding a surcharge to cover the credit card fee is the more direct method while incentivizing cash payments is indirect.
Credit card processing fees typically cost a business 1.5% to 3.5% of each transaction's total. For example, you'd pay $1.50 to $3.50 in credit card fees for a sale of $100.
California Senate Bill 478, part of the Consumer Legal Remedies Act, bans all “junk fees” on purchases across California. This includes credit card surcharges in most situations. It's also worth noting that California's new laws extend beyond credit card surcharges.
The card issuer.
These are banks that supply the consumer with the card itself, such as Capital One or Chase. By charging an interchange fee, these banks cover their operating costs and fraud protection which is between 1.7%-2% and is also non-negotiable.
Credit card surcharges can't exceed the cost of accepting the card or 4 percent, whichever is the lower amount, even if it costs the business more than that amount to process your credit card payment.
Many industries collect service charges, including restaurants, banking, and travel and tourism. When collected, these charges may cover services rendered to the consumer, or they may cover administrative or processing costs. Service charges are paid directly to the company.
Online: “By selecting 'credit,' you agree to pay a $3 convenience fee.” Over the phone: “I'm happy to process your credit card payment, but please be aware there is a $3 convenience fee.” The key is to be transparent about the fee and deliver the information confidently.
For instance, a government office may allow taxpayers to pay their taxes online and charge a 2.5% convenience charge for using a credit card. This means that for a payment of $1,000, the taxpayer would be charged an extra $25 for the convenience of paying with a credit card.
What is an Effective Rate for Payment Processing? Your effective rate is your month's total processing fees divided by your monthly total sales volume. It's calculated as a percentage and can be found on your monthly credit card processing statement.
How to Calculate Processing Fees. The formula for calculating processing fees is as follows: (order amount * percentage fee) + (transaction fee * number of transactions).
Any merchant that accepts multiple payment methods can charge convenience fees for non-standard payment options. This wouldn't include ecommerce only businesses or most transactions in-person, as these would be considered standard payment options.
How to avoid a convenience fee. Convenience fees for online or phone payments can easily be avoided by utilizing alternative payment methods. One option is to use cash, check, or an ACH transfer. These methods typically do not incur convenience fees, making them a cost-effective alternative.
No. The ability to surcharge only applies to credit card purchases, and only under certain conditions. U.S. merchants cannot surcharge debit card or prepaid card purchases.