Merchants can usually add credit card fees


Your Business Credit
Elaine Pofeldt is a journalist whose articles on entrepreneurship and careers have appeared in Fortune, Working Mother, Money and many other publications. She is a former senior editor at Fortune Small Business magazine and an entrepreneur herself, as co-founder of, a website for independent professionals. She writes "Your Business Credit," a weekly column about small business and credit, for

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Question Dear Your Business Credit,
I paid my liability insurance company with my credit card because they wanted the payment in full and they added on a 2 percent fee for using the credit card. Can they do this? -- Monica

Answer Dear Monica,
Ouch! On a big-ticket payment like a year's worth of liability insurance, just a 2 percent fee can hurt. Unfortunately, there is a good chance the insurance company is allowed to do this.

As I discussed in my previous column, "Can my business add a surcharge for card-paying customers?," merchants' rights to add surcharges to credit card transactions are largely governed by their contracts with the card companies. So are their rights to add convenience fees. In some industries, such as utilities -- and insurance -- it's common for companies to charge customers convenience fees when patrons opt for a payment method that is not a normal one for the merchant or when customers choose an alternative payment channel.

The credit card companies each have their own rules governing convenience fees. You can read more about them in "Convenience fees: When is it OK to charge extra to use a credit card?."

Convenience fees are distinct from surcharges. With a surcharge, a merchant that normally accepts credit cards (say, a gas station) tacks on an extra percentage for customers who use them. Under a settlement that took effect in January 2013, merchants can add surcharges to Visa and MasterCard purchases equal to what they pay to accept the card, up to 4 percent. Both Visa and MasterCard have published guidelines for merchants that go into detail.

Meanwhile, American Express has allowed merchants to pass along a surcharge to customers under a separate court settlement. The settlement administrator has published a frequently asked questions page that explains the rules. It says that merchants can pass along a surcharge on credit card purchases provided it is not "any higher, after accounting for any discounts offered at the point of sale, than any surcharge imposed on transactions made with other credit cards, payment cards, payment methods, products or services accepted by the merchant except for: (a) debit cards; (b) cash; (c) checks; (d) wire or ACH transfers; or (e) proprietary store cards." The amount of the surcharge can't exceed the American Express merchant discount rate that applies to that transaction and the amount of the surcharge the merchant is permitted to impose on any other credit card brand. The merchant must also fully disclose the surcharge to customers.

That said, you will notice from reading the Visa guidelines that some states ban credit card surcharges. Laws that limit surcharges exist in California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, Oklahoma, Texas and Utah. If you live in one of these states and think the surcharge you paid is illegal, contact the state attorney general's office to find out what the laws are.

So what if a surcharge is legal in your state, but you want to avoid it? Or you just don't want to pay that convenience fee? Many companies will let you pay by ACH debit from your bank account or by old-fashioned check.

Merchants reading this should take note of your complaint. Although your insurance company may be allowed to charge you the fee, that doesn't mean doing so is a smart long-term business decision.

Many consumers, like you, don't like getting hit with an unexpected surcharge or fee. Getting zinged this way can lead to mistrust, which is never the basis for a good business relationship.

It is very easy to shop around for almost anything these days, and if a merchant raises prices via an added fee, customers may be tempted to look for a better deal. Losing good customers may end up costing you a lot more than you'll gain by adding a surcharge or fee.

See related: Can a doctor's office charge a credit card surcharge?, Minimize costs of card acceptance without surcharges, Fight payment processing fees in medical payments

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Published: April 6, 2015

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