Considering whether or not surcharging is right for your business is a very important part of your business. Start by educating yourself with some important information — the difference between checkout fees and convenience fees, the states where merchant surcharging is currently banned, and the procedures merchants must follow in order to start surcharging.
Checkout Fees Vs. Convenience Fees
Until a recent Visa/MasterCard settlement, merchants were allowed to charge their customers convenience fees for using credit cards in a very limited set of situations. These fees are meant to be used when paying with credit card is a convenience rather than some other forms of payment such as a money order.
Most transactions — including any transaction that is face-to-face, and any transaction done over the phone or online if that is the only method of payment available — fall outside the definition of a convenience fee. Elite Merchant Services has an excellent guide to convenience fees, and the rules for these have not changed.
What has changed are the rules regarding merchant surcharging or checkout fees. Checkout fees are traditionally defined as a fee charged to consumers who use credit cards that would not have been charged if the consumer had paid with cash or a check. Visa and MasterCard have always prohibited these fees as part of their merchant agreements; Discover and American Express allowed them, but forbid businesses to surcharge their cards differently than any other brands. So, unless a business only accepted Discover and American Express, checkout fees were off the table.
As of January 27, 2013, these rules have changed. Businesses are now allowed to charge checkout fees to customers who use Visa and MasterCard credit cards (NOT debit cards!), and may continue to surcharge Discover and American Express, who were not involved in the recent settlement. There are limits on what merchants can charge and conditions that merchants must meet in order to charge checkout fees — the next part of this article will explore these in depth.