What Is a Convenience Fee & Should You Charge One?

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Not all payment methods are created equal—at least when it comes to their cost to your business. Accepting payment methods outside your normal checkout flow—like over the phone or by paper check—can help you close a sale, but it also creates an administrative burden for you. That’s where convenience fees can come in. But there are rules around levying these fees. 

This guide breaks down when it makes sense to charge a convenience fee, what rules to follow, and smart alternatives that can keep your margins intact—without frustrating your customers.

What is a convenience fee?

A convenience fee is a type of fee you charge customers for accepting a payment method that isn’t customary for your business. For example, let’s say you typically accept payments in person or online with no extra fees. If a customer wants to complete an order over the phone or by mail, you might charge a convenience fee to accept this type of payment. You’d disclose the fee to the customer and add it to their bill.

These fees are often associated with a “card not present” transaction, which occurs when a customer wants to pay online, over the phone, or by mail. Some payment processors consider these transactions riskier and can charge higher credit card processing fees to handle them. The convenience fee is meant to offset these higher costs. 

Convenience fee vs. surcharge 

You may hear the terms surcharges and convenience fees used interchangeably, but they aren’t the same. Both surcharges and convenience fees are additional charges a business adds to a customer’s bill to help offset costs. 

The key difference is that surcharges target a specific payment method, while convenience fees kick in when a customer wants to pay with an alternative payment channel. Here’s a quick breakdown:

A surcharge is a fee you add to all credit card payments—whether or not it’s a standard payment method—as a way for you to offset credit card processing costs. Credit card surcharges are illegal or restricted in some states, such as Colorado, Massachusetts, and Utah.

In places where surcharges are allowed, you’ll need to notify customers in advance and include the fee on the customer’s receipts; the surcharge can’t exceed 4% of the transaction amount. Some states set a lower maximum. All states prohibit surcharging on debit cards or prepaid debit cards. This applies even when the card is run as a signature-based transaction without the PIN.

A convenience fee, on the other hand, is only charged when the merchant accepts a payment method that’s not part of their standard or customary options or procedure. Unlike surcharges, convenience fees are generally allowed in all 50 states, whether you’re processing credit card transactions or other payment types. Merchants are usually required to calculate convenience fees as a fixed amount, not a percentage of the total payment amount.

If a merchant violates the rules—for example, by applying a surcharge and calling it a convenience fee—they risk fines or penalties from the card network. For both types of fees, it’s important to consult your local laws and card network rules before charging them.

Restrictions on charging convenience fees

All 50 states allow businesses to charge convenience fees when accepting a particular payment method as an exception to their usual payment process. Merchants establish which payment types they’ll accept by setting preferences through their payment processor, POS system, and ecommerce platform. They can also choose whether to accept a payment method outside that list and charge the convenience fee.

But there are certain requirements you’ll need to follow when charging convenience fees on customer transactions:

• Disclose the fee. In addition to clearly informing the customer about the convenience fee, you must include the amount of the fee, why you’re charging it, and whether it’s refundable. This ensures transparency. 

• Charge it for a specific purpose. The fee can only be charged for the convenience of using a different payment method.

• Allow the customer to avoid the fee. You’ll need to provide at least one payment option that doesn’t include a convenience fee. 

• Charge the fee only on certain transactions. Ecommerce businesses might typically charge a convenience fee for purchases made via phone. Other businesses might charge a convenience fee for purchases made at a payment link if the business doesn’t have an ecommerce site. Most merchants can’t charge the fee on in-person transactions.

• Charge a flat fee. A convenience fee typically must be calculated as a flat or fixed amount, rather than a percentage of the sale. 

• Follow any applicable rules. The merchant will need to follow local or state regulations governing convenience fees, which vary by jurisdiction. Merchants also need to follow federal rules. 

• Set fair guidelines. You must apply convenience fees equally across the board for nonstandard payment methods rather than discriminating against one particular payment method.

Do credit card companies allow convenience fees?

All of the major credit card networks allow convenience fees, but merchants must follow network rules before charging them. Here’s what to know:

• American Express allows merchants to charge a convenience fee on in-person payments or recurring/installment payment transactions. The merchant must clearly disclose the fee to customers before they check out and must apply the fee equally across all forms of payment accepted in the payment channel.

• Visa allows merchants to charge a convenience fee on transactions outside of the merchant’s options for standard payments. Merchants must give prior notice to customers before charging the fee, and must charge all alternative payment methods equally.

• Mastercard allows merchants to charge a convenience fee, as long as they clearly disclose the fee to customers before charging it. 

• Discover says merchants can charge a convenience fee if they disclose it and apply it equally across all card networks.

Some card network rules are more permissive than the laws regarding these fees—but you’ll need to follow the law first and foremost before charging them. Consider consulting a lawyer if you’re unfamiliar with your state laws.

It’s also helpful to know that credit card issuers—like Chase, Capital One, or Citi—generally don’t set their own rules for convenience fees. Instead, they follow the guidelines set by the card networks, which handle the transaction rules. 

Alternatives to convenience fees

If you don’t want to impose credit card convenience fees and surcharges but you still want to curb your administrative and processing fees, you could:

• Promote lower-fee payment options. Highlight lower-cost methods, like Shop Pay, at checkout. Make them easy to choose and explain why they help your business. 

• Offer a cash or debit discount. Instead of charging a fee to accept credit cards, offer a small discount to customers who pay with cash or debit. It’s a positive way to reward lower-cost payment methods.

• Set a minimum for card payments. Encourage small purchases to be made with cash by setting a minimum amount (like $5) for using a credit card. Just make sure it follows card network rules.

• Adjust product pricing slightly. Build card fees into your overall pricing so you’re not singling out any payment method. This keeps checkout simple and avoids surprise charges.

• Encourage subscriptions or bundles. Offering products as part of a subscription or bundle helps increase order size, which can make credit card fees a smaller percentage of the sale.