Q&A: Can private schools charge credit card convenience fees?

Your Business Credit columnist Elaine Pofeldt
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 200kfreelancer.com, a website for independent professionals. She writes "Your Business Credit," a weekly column about small business and credit, for CreditCards.com.

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Question Dear Your Business Credit,
My daughter will be a freshman at a private high school in the Chicago area. She was required to take a summer math course. When I went online to register for the summer course, I learned that in addition to the $835 tuition fee, I am being charged a 2.75 percent convenience fee to pay with my credit card. Is this legal? My understanding is with Visa, they can only charge a flat-rate convenience fee.  – Joan

Answer Dear Joan,
Given the high cost of tuition, I can understand why you’re concerned about paying what amounts to an extra $23 on a single course. Unfortunately, many schools are now passing along the cost of credit card processing to students and their parents who choose to pay by credit card. Credit card processing isn’t cheap, and they are feeling the pinch.

For the benefit of readers who aren’t familiar with convenience fees, these are charges added to a credit card transaction for the privilege of using an alternative payment channel or one that is not standard for the type of merchant. For instance, utility companies that usually receive payments from customers by check are often allowed to charge a convenience fee if customers pay by credit card.

In 2016, Creditcards.com studied colleges and universities that accept credit card payments for tuition. We found that 85 percent of U.S. colleges and universities accept credit cards for payment in at least some circumstances. Among that group, 57 percent add convenience fees, with the average one being 2.62 percent.

You’re correct in understanding that the agreement merchants sign with the credit card issuers determines if they can add convenience fees. However, merchants must meet certain requirements to do so.

Generally speaking, they can charge a convenience fee only if the payment takes place across an alternative payment channel, such as online or by phone; customers are told about the fee in advance or it is clearly disclosed; and if the fee is a flat or fixed price, rather than a percentage of a sale. (For an overview of the policies of the major card issuers, see our story “Convenience fees: When is it OK to charge extra to use a credit card?”)

However, K-12 schools are allowed to charge a variable convenience fee that is a percentage of tuition under Visa’s rules. The schools were added to Visa’s special government payment program, which allows fees that are percentage-based. College and universities also fall into this program.

I understand how hard it is to pay for private school, but if there is any way to avoid putting any future classes on a credit card and pay with a check, the savings will add up. For instance, if your daughter plans to take another summer course next year, you might auto-deduct $70 from your pay each month and put it in a special savings account you set up for that purpose.  

We all want the best education possible for our kids, but you don’t want to put yourself into a situation in which you have to live with more debt than you can reasonably pay off.

See related: Convenience fees: When is it OK to charge extra for credit card payments?

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Updated: 11-23-2017