Surcharge, Cash Discount, and Convenience Fees – What’s the Difference?
There’s a lot of misinformation out there. We’re here to clear it up.
A surcharge, otherwise known as a ‘checkout fee,’ is a fee imposed upon the consumer during a credit card transaction that covers the cost to accept the payment method. The POS system or terminal automatically detects when a consumer is paying with a credit card, and imposes the surcharge on that transaction type only. Before the transaction goes through, the POS system or terminal offers alternative payment options such as debit card, check, and cash if the consumer would prefer to avoid a surcharged transaction.
A cash discount is a marketing and sales tactic that a merchant utilizes, applying a small customer service fee on all customer transactions. This fee is then removed if the customer chooses to pay with cash or in-store gift card. The increase in product/service cost is meant to cover the transaction fee that the merchant pays to accept the electronic payment method.
A convenience fee is charged regardless of the payment method. There are additional regulations for convenience fees, including the rule that states convenience fees must only be charged on alternative payment channels. For instance, a merchant can charge a 2% convenience fee on credit card, gift card, e-check, and other payment methods if the customer chooses to pay over the internet versus face to face.
Service fees are fees imposed to cover costs other than payment acceptance. For instance, labor costs, delivery fees, fuel costs, and services fees in lieu of tipping.
How long do I need to wait before surcharging?
Merchants are required to be registered with the card brands for 30 days prior to surcharging. Once you decide to begin surcharging, NMA will notify the card brands and get you set-up.
Do I need to notify customers of the surcharge?
Yes, merchant will need signage at the point-of-entry, point-of-sale, and on the receipt. NMA will ensure that all surcharging merchants have compliant POS systems and terminals with surcharge language printed on the receipt. If you have questions about appropriate surcharge signage at the point-of-sale, please contact NMA merchant support.
Is there a limit to how much can be surcharged?
Yes, currently merchants are limited to a surcharge cap of 4%.
What transactions can I surcharge?
Currently, only credit card transactions can be surcharged. Surcharges cannot be imposed on debit, prepaid, cash or check transactions.