How to Avoid Credit Card Convenience Fees and Surcharges

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Understanding Convenience Fees and Credit Card Surcharges

At O1ne Mortgage, we prioritize consumer credit and finance education. This post aims to provide an objective view to help you make the best decisions regarding convenience fees and credit card surcharges. For any mortgage service needs, call us at 213-732-3074.

What Is a Convenience Fee?

A convenience fee is a charge that occurs when you make a payment through a particular channel or with a specific payment method. For example, a movie theater may charge you a convenience fee if you buy tickets online instead of in person. Similarly, paying a bill over the phone could incur a fee if the provider prefers online payments.

Other merchants may assess a convenience fee if you opt to use a credit card instead of one of the standard payment methods, such as cash, check, or electronic payment. Common situations where you may be charged a credit card convenience fee include:

• Rent payments
• Paying your tax bill
• Utility payments
• Peer-to-peer transfers

Why Merchants Charge Credit Card Convenience Fees

Accepting credit cards can be expensive for merchants. Depending on the payment network, they may need to pay a merchant fee of around 2% or higher every time a customer pays with a credit card. For merchants that process the majority of their transactions via check, cash, debit card, or ACH transfer, charging a convenience fee makes taking the occasional credit card payment worthwhile.

However, not just anyone can charge a convenience fee on credit card transactions. Depending on the payment network, policies can vary:

• Visa: Merchants are allowed to charge convenience fees as long as it’s a flat fee, clearly disclosed, and assessed on a transaction that allows the cardholder to make a payment outside of the merchant’s normal payment channel.
• Mastercard: Only pre-certified government agencies, educational institutions, and their third-party agents can charge convenience fees on Mastercard credit card transactions.
• American Express: Merchants can offer incentives for non-credit-card payments as long as it’s clearly disclosed and offered to all customers.
• Discover: Merchants can’t charge a convenience fee to a Discover cardholder unless it charges the same fee to a cardholder with a Visa, Mastercard, or American Express credit card.

What Is a Credit Card Surcharge?

A credit card surcharge is similar to a credit card convenience fee. The main difference is that surcharges can be assessed in any situation for the privilege of using a credit card. Depending on where you live and the payment network for your card, you could be charged as much as 4% of the transaction amount.

Three states (and Puerto Rico) have laws that prohibit credit card surcharges: Connecticut, Maine, and Massachusetts. Other states have laws on the books that restrict or prohibit surcharges.

How to Avoid Paying a Credit Card Convenience Fee or Surcharge

For the most part, it’s relatively easy to avoid both convenience fees and surcharges assessed on credit card transactions:

• Be observant: Merchants typically need to clearly disclose the fee during the checkout process.
• Use a different payment method: Consider paying by check or electronic transfer instead of a credit card.
• Look for cash discounts: Some merchants offer a discount if you pay in cash instead of a credit card.

The Bottom Line

Using your credit card for all of your everyday purchases can help you rack up more rewards and streamline your bill payments. However, in some cases, you may be charged for the convenience of using a credit card over another payment method. Depending on the amount of the fee and your card’s rewards rate on the transaction, you could still come out ahead, but that’s unlikely in most cases. As a result, it’s important to watch out for convenience fees and surcharges and make sure you have an alternative payment method handy to avoid the extra cost.

For any mortgage service needs, call O1ne Mortgage at 213-732-3074. We’re here to help you make the best financial decisions.

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