The Pros and Cons of Fees

Convenience fees and surcharges might be right for your business, but do seek expert advice before making a decision, advises Marci Gagnon of Qualpay:

Over the past few years, there has been a lot of conversation within the energy industry about charging customers surcharges and convenience fees to reduce the cost of credit card acceptance. As with credit card payments in general, there are some pros and cons to charging these types of fees, different rules based on the type of fee and different laws from state to state.

The terms “surcharging” and “convenience fees” are sometimes mistakenly intermingled. There is a distinct difference between the two.

  • A surcharge is an additional fee that a customer is charged for the privilege of using a credit card, and is based on that merchant’s processing fees, for instance a flat 4%.
  • A convenience fee is an extra charge customers pay for using a more convenient payment channel and is not limited to credit cards. This fee is a flat dollar amount, for instance $5.00.

Let’s first start with a brief overview of surcharging:

Which states allow surcharging? Currently 44 states allow surcharging; surcharges are prohibited in Colorado, Connecticut, Kansas, Maine, Massachusetts and Oklahoma. Litigation surrounding surcharges is active; information and laws change. If your company caters to customers across state lines, you will need to review guidelines in all states you serve. 

How do I begin? The first step towards surcharging is determining if it is allowed in the states you do business, and then notifying the card brands 30 days in advance to register. Contact your payment processor to assist you with these steps.

What can I charge? Companies are allowed to assess a surcharge of up to 4%, based on the average amount you pay in credit card processing fees. If you choose to surcharge, you will need to apply the charge to every brand of credit cards you accept.

What else do I need to know? Since the intent of surcharging is to offset the credit card cost, a surcharge can be applied only to credit cards. It cannot be assessed for checks, debit cards, or prepaid cards. Further, your company can not be operating exclusively in an online e-commerce environment.

Customer notification and proper signage.  Customers must be notified at the point of entry and sale as well as having any fees itemized on invoices or receipts. Receipts must show the surcharge fees and you must refund surcharge fees when refunding your customers. 

Now for convenience fees:

Which states allow for convenience fees? Convenience fees are allowed in all 50 states.

How do I begin?  The business collecting the payment may not be exclusively operating in a card-not-present environment. An alternative payment channel will need to be set up. Notification to your payment partner and back-end software for proper set up is needed.

What can I charge? Convenience fees must be a flat, fixed amount applied to all means of payment accepted through the non-standard payment channel, including debit cards, ACH and prepaid cards. Convenience fees cannot be applied to recurring payments.

Customer notification and proper signage. The fee must be included in the transaction amount total and clearly identified on invoices and receipts.

Contact your software or portal provider to discuss the changes you will need to make to the receipts and make sure they can accommodate charging these fees through their platform.

If you decide to implement surcharges or convenience fees, it is a good idea to contact your processing partner to perform research on your behalf and engage your legal team to ensure you are following each state and card brand guidelines. Your processing partner can also review your processing to ensure you are receiving and passing on the proper rate.

Finally, it’s not always in your best interest to add additional fees; just because you can recoup some of your fees does not mean it is the best choice for your business. Customers may decide your fees are too high and switch back to checks — with 30-, 60-, 90-day billing — leading to outstanding invoices or possible loss of customers to competitors. Before you surcharge, check out your competitors and price sensitivity of your market — saving on credit card fees could cost more than that 4%.

Marci Gagnon is vice president of strategic alliances for Qualpay, which provides processing solutions to fuel delivery and service businesses. For more information contact Marci Gagnon at or visit

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