Thursday, September 6, 2018

Convenience Fees and Surcharges

How do Surcharge Rules Differ from Convenience Fees

Visa allows most Merchants two ways to add charges to Visa card payment transactions to let the Merchant pass the cost of the card transaction on to the person making the payment.
  1. Convenience Fees
  2. Surcharges

I wrote about "convenience fees" in my last post...

Rules for Surcharges

Surcharges differ from convenience fees on several major points.

  • Only applied to credit card payments
  • Cannot be applied to debit card payments
  • Can be a flat fee or percentage
  • Cannot be an additional revenue generator for the merchant
  • Merchant must register with Visa stating they are charging surcharge in advance

Limits on Surcharge Amount

The amount of the surcharge is limited by the actual cost of the transaction...

"the US Credit Card Surcharge amount is not greater than the applicable Merchant Discount Rate for Visa Credit Card Transactions at the Merchant"

The surcharge can cannot be charged on any debit card transactions...

"surcharges are not permitted on debit Transactions regardless whether a Cardholder selects the "credit" or "debit" button"

It is up to the merchant to determine if the actual card being used is a debit or credit card. This is typically done by referencing BIN tables with the processing software.

The Visa Rules on surcharging can be found beginning on page 378, Rule 5.6. at this link...

Tuesday, September 4, 2018

Visa Rules on Convenience Fees

Can An Insurance Agency Charge a % Fee

In a seven or eight states there are no insurance specific laws or general business laws which prohibit an insurance agency from charging a convenience fee to their customers who pay by credit card or debit card.

In these states, insurance agents, like any other business, can charge convenience fees or surcharges. These two things - "convenience fees" and "surcharges" - are defined as different things by Visa. Today I will cover convenience fees. In my next post I will cover surcharges.

What an Agency Was Doing

Recently an agent mentioned they were charging a 3% convenience fee on card payments. They were not charging the fee on all lines of business.

2 Violations of Visa Rules

This situation creates the following violations of Visa Rules:

1 - Visa requires a flat dollar fee to be charged for all convenience fees regardless of the payment size

2 - Visa requires that all card payments be charged a fee or that no card payments be charged a fee.

Here are the Rules:

Page 385 of the above document, rule

Refer to Table 5-7.

Visa prohibits percentage. Only flat dollar amount can be charged and that amount has to be the same for all payments - Whether a $10 premium payment or a $10,000 premium payment.

"A flat or fixed amount, regardless of the value of the payment due In the AP Region, an ad valorem amount is allowed as required by applicable laws or regulations."

Visa requires all payments made through the payment channel - electronic payments in this instance - be charged the same fee.

"Applicable to all forms of payment accepted in the payment channel"

I hope this is helpful in your understanding of the way you can charge fees in compliance with your Merchant contract.