Credit Card Convenience Fees vs. Surcharges, and How to Avoid Them

Using a credit card for the bulk of your purchases can yield huge benefits if you pay your balance faithfully and avoid credit card interest like the plague. Not only can you score special perks like purchase protection, guaranteed returns, and zero fraud liability, but you can earn credit card rewards, too. Those rewards might come in the form of cash back or as travel credit, hotel points, or airline miles.

Unfortunately, one huge hurdle often stands in the way of scoring big on your largest expenses – convenience fees. These fees are charged by merchants when they accept an unconventional form of payment or let you make a payment a certain way.

Here’s where things get interesting: Not every convenience fee is charged as a result of using credit as payment. For example, airlines often charge consumers a convenience fee for booking airfare or changing an air ticket over the phone, and that’s true whether you pay with credit or not. And when you buy a concert ticket through Ticketmaster, you’ll pay a convenience fee (a.k.a. “service fee” or “processing fee”) to the firm no matter how you pay for your tickets.

Convenience Fee vs. Surcharge

Another factor to consider is whether you’re paying a convenience fee or a surcharge. By and large, credit card issuers draw a line in the sand between these two terms. Where a convenience fee is typically charged regardless of the type of payment you use, a surcharge is a specific charge levied each time you use a credit card for payment.

Generally speaking, surcharges are frowned upon by card issuers because they tend to see them as a deterrent or punishment for those using credit. As Visa notes, merchants in the U.S. and U.S. territories have been permitted to impose a surcharge as of January 27, 2013. However, they’re required to limit the amount of the surcharge to the merchant discount rate for credit card transactions or 4 percent – whichever is lower. Merchants also cannot require a minimum purchase requirement of more than $10 for Visa transactions, notes Visa.

Still, Visa notes that surcharges are extremely limited by law in certain states – Colorado, Connecticut, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas. In New York, California, and Florida specifically, laws surrounding surcharges are currently pending or in the midst of negotiation.

When Will I Be Charged a Convenience Fee?

Convenience fees – which can be charged regardless of how you pay – can vary depending on the merchant or service provider and the way they normally accept payments. Because of this, you may or may not be able to avoid convenience fees altogether. In the example of buying concert tickets, the fee is charged regardless of whether you with cash or credit. Other merchants, meanwhile, may only charge a convenience fee if you use a specific form of payment or use a credit card.

Here are a few bills and expenses where a convenience fee will likely be charged:

  • Cable, phone, and internet: Cable, phone, and internet providers usually let you pay your bill online, and may or may not charge a convenience fee if you use credit.
  • College tuition: Paying college tuition with credit is a great way to rack up rewards. Unfortunately, many schools charge a convenience fee for using credit as payment. As a recent CreditCards.com study notes, 255 out of 300 large colleges studied accepted credit as payment and 145 of those schools charged a fee.
  • Federal taxes: The Internal Revenue Service (IRS) allows credit card payments for federal tax bills through three services with fees ranging from 1.87% to 2.25%.
  • Property taxes: Your state government may allow you to pay property taxes with credit provided you pay a convenience fee. Make check to check with your local office to find out how these fees are charged, and how much they might add up to.
  • Rent: Your landlord may allow you to pay rent with credit for free or for a fee. You can also pay rent through a third party site like RadPad, WilliamPaid, or Plastiq for a fee.
  • Utility bills: Some utility companies (electric, gas, etc.) let consumers pay their bills with credit for free, while others charge a flat or percentage-based fee for convenience.

How to Avoid Credit Card Convenience Fees

If you’re against paying convenience fees, you should check with each merchant and provider you’re using to find out how you can pay your bill without incurring additional costs. This may mean paying your bills with cash, debit, or direct bank withdrawal instead of using credit. You’ll miss out on valuable credit card rewards this way, but at least you won’t pay extra fees in addition to your regular bills.

If you feel extremely strongly about the issue, you can also stop patronizing merchants that charge convenience fees. By spending your dollars with merchants and service providers that don’t charge extra fees for convenience, you vote for your preferences with your own dollars.

If you’re charged a convenience fee or a surcharge and feel it was unwarranted, you should contact your card issuer and report the merchant right away. Your card issuer may contact a merchant and negotiate to have the surcharge or convenience fee removed on your behalf.

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