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Convenience Fees: Reducing the Cost of Payment Processing

In this blog, we will look at how organizations can reduce the cost of payment processing with convenience fees. We will also look at some examples of theset types of fees and the terms that should be followed when using them.

What are Convenience Fees?

Convenience fees are fees charged to customers by organizations when accepting payments through alternative payment channels.

In other words, if the normal payment method is to pay on location or by mail, but a customer completes a payment electronically by some other means, such as IVR, then that customer may be charged a convenience fee – a fee for the use of the alternative method that is provided.

Merchants can assess convenience fees for ACH, credit cards, and debit cards. But they cannot charge a percentage of a transaction. All convenience fees must be a flat fee and the same amount must be charged through all payment channels charging convenience fees. In other words, the fee is charged for the use of the alternative payment method and not for the payment made.

For example, if a merchant is charging a convenience fee of $3.00 for payments made by phone for an ACH transaction, they must also charge a $3.00 convenience fee if the merchant also accepts credit card transactions by phone.

Convenience fees and the amount being charged to a customer must always be disclosed. Consumers must understand that the fee is not required, and it is clear to the consumer that a free method is available.

Payment Plans for Reducing the Costs of Payment Processing

Using payment plans can be another great way of not only increasing on-time payments but also reducing the costs associated with payment processing.

With recurring payments, convenience fees may be charged. With payment plans that use ACH, convenience fees can be charged with every payment. Also, convenience fees can be charged for payment plans that use debit and credit cards. However, there can only be one convenience fee charged on the first payment made and not on additional payments.

Are Convenience Fees Surcharges?

Convenience fees are not the same thing as surcharges. Surcharges are a fee charged for the use of credit cards.

Unlike the standard convenience fee, surcharges are included in prices charged to consumers and are not broken into separate transactions.

Card brands require that merchants provide notice before a surcharge model is put in place and require disclosures to be posted. Card brands provide strict rules in the amount that can be charged, and the surcharge cannot be charged for the use of debit cards.

In addition to the rules placed by card brands, many states have regulations that apply to a surcharge model. It is illegal for surcharges to be over 4%, and in the states of California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, Texas, and Puerto Rico, surcharges are illegal altogether.

How Can Convenience Fees Reduce the Cost of Payment Processing?

Payment processing is not free, obviously. Merchants often pay around 3% to 4%, give or take, per transaction. And these fees can add up quickly.

Most card issuers allow merchants to charge consumers convenience fees when merchants provide consumers with alternative methods for payments. These fees, in turn, can help offset the costs of processing payments.


Convenience fees are a great way for merchants to reduce the cost of payment processing. Landlords, utility companies, and municipalities often charge convenience fees to their customers who pay their bills through alternative payment channels.

If a merchant wishes to apply a convenience fee through multiple payment channels, they must all be the same amount. Merchants must also offer one payment method that is free of charge.

If your organization is looking to utilize a payment platform that can make the payment experience much easier for all parties involved, contact us. We offer payment platforms that work across any device, IVR, ACH, and industry-specific payment gateways.