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A Super Simple Guide To Convenience Fees: What You Need To Know

If you have ever looked at the bill from the grocery store, restaurant, or even bookshop and noticed an additional entry after the subtotal, you might have not understood why you’re paying an extra dollar or two for a convenience fee. For the customer, having to pay an extra dollar is certainly not convenient. The fee also has no details about what kind of convenience you purchased that costs a couple of dollars.

Posted: 6th June 2022 by Finance Monthly
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This is something that confuses a lot of people but they seldom stop to find out why they are having to pay this extra money. In some cases, this is marketed a little differently under the title of a service fee, but again there is no explanation about what services this is for exactly. If you were asked “how would you like to pay?” the convenience fee may be in response to the answer you gave to the question. Below, we cover all the important things you need to know about convenience fees and why you’re having to pay them.

Why Is The Customer Charged?

In most situations these days customers will choose to pay through a credit card. Especially since the pandemic of 2019, paying through cash has become far less favourable. In fact, people are gravitating towards contactless payment solutions and trying to watch out for their health and safety. In the past, credit cards were considered a luxury. They were not very common and both payment processing companies and merchants needed specialised hardware and software to execute payments. No business wants to increase its costs so the solution was to charge the customers using credit cards an additional cost to cover the processing fees that the business had to bear.

Customers paying through cash or debit cards didn’t pose this problem therefore they were exempt from these additional charges. Today, newer payment options also carry a certain cost for the merchant and since they don’t want to reduce their profits, they pass this on to the customer. These payment processing costs are particularly problematic for merchants in situations where the customer is buying things for a very small amount. Generally, payment processing companies have fixed rates per transaction, much like how merchants have a flat-rate processing fee regardless of the value of your bill. This makes it more inconvenient for people that are buying things of a lower value or those that have a smaller bill overall since they still have to pay just as much in convenience fees.

Card Surcharge

A lot of people confuse the convenience fee with the card surcharge. While they both serve a similar purpose, the way they are charged does vary slightly.

A convenience fee is charged to cover the processing fees of a transaction but merchants are not allowed to cover the entire fees. For instance, if a transaction costs the merchant $2 to process, they might charge $1 or $1.50 in convenience fees. Also, the convenience fee is a fixed value regardless of the value of the transaction because that is how the payment processor charges the merchant as well. 

On the other hand, a surcharge is usually a percentage of the total value of a transaction. Moreover, it is also common across certain payment methods such as credit cards belonging to Visa, Master, Visa Infinite, and other brands. A surcharge is not an alternative to merchants imposing convenience fees but in fact, most merchants charge both of these fees depending on the situation. Also, the convenience fee for using a credit card will be the same regardless of what kind of credit you use. The surcharge will vary depending on the kind of credit card you have since payment processing companies have different rates for different credit card companies. You will find that certain cards have lower surcharge costs than others.


Whether a merchant chooses to charge convenience fees, how much they choose to charge and who they choose to charge are questions that are dictated by the payment processor rather than the merchant.

There are a lot of payment processors that merchants choose to work with. Different kinds of businesses need to work with specialised payment processors. For instance, there are certain payment processors that specialise in working with brick and mortar stores while others work solely with online businesses. There are certain rules that businesses have to keep in mind when deciding the convenience fee they want to charge. They also have to take into consideration their own circumstances such as the number of customers they get, the infrastructure they have, and their own pricing, to find a suitable convenience fee.

Generally, merchants are free to decide the kind of fee they want to charge but given that nearly all merchants are operating under similar frameworks, they all end up charging a fee that is relatively similar. Also, certain payment systems, such as invoicing, keyed payments, and credit cards from certain companies will always be more expensive regardless of which merchant you’re doing business with. This is because handling that kind of payment is generally more expensive for all merchants.

How To Save Yourself

In some cases, merchants will have a higher convenience fee for certain solutions because they want customers to use an alternative. Others will have discounts available for specific payment options because they want to motivate customers to use those options.

As a customer, there are a few things you can do to save yourself from having to face the inconvenience of the convenience fee. The easiest solution is to have multiple payment options at your disposal. If you know your local grocery store charges a convenience fee for credit cards, then pay through cash. Ask them what channels don’t have a convenience fee and become part of that ecosystem. Another option is to look for different stores. One merchant might charge a convenience fee but the store on the other side of the road might not. Explore your options to see where you can save money.

The convenience fee is something that started out when credit cards were new and it really was a hassle for both merchants and payment processing companies to manage the transaction. However, today we are in an era where credit card payments and digital accounts have become the norm. As much as merchants want to remove the convenience fee, they can't remove it until the payment processors change their pricing system. At the end of the day, the customer takes the hit but the merchant also pays the price in the business they lose to competition because of the convenience fee they charge.


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