Understanding Surcharges

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A surcharge is a fee assessed to credit card transactions by Merchants to their customers as an additional charge to cover specific costs associated with credit card processing.

Surcharges can cause legal complications if each requirement for compliance and registration is not met or if the surcharge is not properly configured. The information provided in this guide outlines the steps to properly register and configure a surcharge (where allowed by law).

Get Started

To begin surcharging, you must follow the steps below:

  1. Notify your Partner Experience Manager that you would like to start a surcharge program to begin setup of the Merchant Group.

  2. Meet all Surcharge Program Requirements.

Result: After the surcharge function and parameter are enabled, set the surcharge collection workflow that works best with your business type.  See Surcharge Workflows below to view diagrams outlining other optional setups.

Surcharge Program Requirements

The use of a surcharge program can result in legal complications. As a result, you must follow each of the compliance requirements below to adhere to card brand and state/local regulations.

Compliance Requirements

  • Surcharges are only permitted on credit cards; they cannot be assessed on debit cards.

  • Surcharges cannot be assessed in states where surcharges are prohibited by law.

  • The maximum recommended surcharge amount is 3% to adhere to Visa and Mastercard restrictions.

  • There must be a separate line item for the surcharge on the checkout page and receipt.

  • Merchants must disclose their full surcharge policy on their checkout page before transaction completion.

Registration Requirements

  • Visa: The surcharge parameter must be used to notify Visa of a transaction surcharge through Payrix Pro. For values populated in authorization and clearing, Visa considers this to be a notification of the surcharge.

  • Mastercard: Registration and notification to Mastercard at least 30 days before surcharging.

  • Discover: No registration required.

  • American Express: No registration required.

  • Acquirer Registration: The Payrix Pro platform will enable the surcharge parameter, sending surcharging Merchants in a given group to the acquirer.

Note

The amount of the surcharge fee assessed on the cardholder does not have to match the amount of the fee assessed on the Merchant. This means that the cardholder could be assessed a 3% fee and the Merchant could be assessed a 3.50% fee.

Platform Requirements

The Partner platform and it’s Merchants have compliance responsibilities to calculate and send the surcharge amount. The Payrix Pro platform is responsible for collecting the surcharge amount paid by the customer on behalf of the Partner.

Partner Platform

Payrix Pro Platform

  1. Calculate the surcharge amount charged to the Merchant from a percentage (3%) into an integer (300) and add the amount to the total parameter for a given surcharged transaction.

  2. Pass the fee to the customer on behalf of the Merchant.

Collect the surcharge fee paid by the credit card customer to the Merchant, from the Merchant transaction amount, on behalf of the Partner using our Fees system.

Set Up a Surcharge

Complete the following steps to enable a Surcharge in the Portal and apply it to a Group:

  1. Click GROUPS in the left navigation panel to open the Groups page.

  2. Locate the group in the table and select any information in the table row to open the Group Profile page.

  3. Click FEES in the list of tabs on the left side of the page.

  4. Click the ADD FEE button in the upper-right corner of the page to open the Add Fee lightbox on the page.

  5. Click the When to Trigger the Fee? dropdown menu and select Capture.

  6. Click How Much is the Fee? down and select Surcharge.

  7. Set the Amount field to 3.00 (for 3%) or less.

  8. Set the Fee Start Date as today’s date.

  9. Name the Fee using an easy-to-find naming convention. Then, click Advanced Options.

  10. Enable the surcharge as a transaction fee by selecting Transaction Fee.

  11. Under the Conditional Rules dropdown, select Payment Card Type is, and then select Credit from the available options.

Result: When a credit card sale transaction is processed by a Merchant as a member of the Group the surcharge will be applied as a transaction fee to each Merchant’s customers.

Surcharge Workflows

Methods to include surcharges into your traditional payment processing workflow include:

  • Merchant Fees with Fee Scheduler

  • Merchant Fees with Fee Listener

  • Surcharge with Fee Listener

  • Surcharge with Fee Scheduler

  • Surcharge with Interchange Plus

If you do not find a workflow that meets your needs, contact your Partner Experience Manager to further scope your request. See the interactive chart below to review the calculation process for your preferred surcharge workflow:

Surcharge Calculation

After enabling your Surcharge fee and fee rule, you can apply the Surcharge using one of the following methods:

This method directly calculates the surcharge fee, where the fee should be 100% of the surcharge amount. This workflow calculates the Surcharge as a secondary percentage to the original total.

To build a Surcharge workflow using the separate calculation method:

  1. Create a Fee for your Group with the following parameters:

    Add Fee Parameter

    Required Value

    Note

    When to trigger the fee?

    Capture

    The Fee triggers at the capture time of a Transaction.

    How much is the fee?

    Percentage

    N/A

    Amount

    100%

    N/A

    Fee Start Date

    {yourStartDate}

    We recommend using today’s date as the Fee Start Date to make the Fee effective immediately.

    Transaction Fee

    Enabled

    Checkbox available under the Advanced Options section of the lightbox.

  1. After setup, your Merchant must set the Amount for the credit card transaction to the original amount and the surcharge.
    For example, your Merchant is charging their customer $100.00 for their original amount, and their Group has a 3% surcharge fee applied. Your Merchant must update the Amount field to include the original amount and the calculated 3% surcharge fee for a total of $103.00.

Result: The Merchant successfully captured their intended original transaction amount. The required 3% added to the original transaction amount to cover the surcharge fee.

This method reverse-calculates the surcharge so that the 3% is based on the original transaction amount, not the total. This workflow calculates the Surcharge as an integrated amount as part of the original total, so the cardholder sees the intended total.

To build a Surcharge workflow using the combined calculation method:

  1. Create a Fee for your Group with the following parameters:

    Add Fee Parameter

    Required Value

    Note

    When to trigger the fee?

    Capture

    The Fee triggers at the capture time of a Transaction.

    How much is the fee?

    Surcharge

    N/A

    Amount

    3%

    3% of the original transaction amount.

    Fee Start Date

    {yourStartDate}

    We recommend using today’s date as the Fee Start Date to make the Fee effective immediately.

    Transaction Fee

    Enabled

    Checkbox available under the Advanced Options section of the lightbox.

  1. After setup, your Merchant must set the Amount for the credit card transaction to the original amount.
    For example, your Merchant is charging their customer $100.00 for their original amount, and their Group has a 3% surcharge fee applied. Your Merchant keeps the Amount field to only the original amount. The calculated 3% surcharge fee is deducted after the transaction has processed.

Result: The Merchant successfully captured their intended original transaction amount. The required 3% surcharge is deducted from their available balance to cover the surcharge fee at a later time.  

Debit Card Handling

Merchants cannot apply surcharges to debit card transactions. To determine if a customer’s card is credit or debit:

  1. Access the Payment History page from the left side navigation panel.

  2. Select the relevant transaction to open the Transaction Details page.

  3. Click Payment Details on the Transaction Details page left menu.

Result: The Payment Details menu shows the BIN Type for each payment method, including tokens. The BIN Type shows a card as either Credit or Debit.  

If you identify a payment method as Debit, you can use one of the following options to apply fees similar to surcharges:

  1. Create a Merchant-paid separate fee for debit-only transactions.

    • Do not charge the cardholder any surcharge fee or pass any value in the fee field.

    • With this option, the Merchant would have to cover the fee amount that you set up in Payrix Pro.

  2. Flag an alert to the cardholder on the checkout page saying that they need to enter a different card.

    • With this option, the Merchant avoids paying a fee.

Result: The customer is not assessed a surcharge or fee for using a debit card. The Merchant is charged a fee for processing the debit card from the Partner.


Comparing Surcharges, Convenience Fees, and Service Fees

As the following fee types are similar in setup and collection process, it’s important to understand the differences between them to avoid legal complications and possible chargebacks.

Surcharges

Surcharges, or Surcharge Fees, as mentioned earlier, are specifically designed for credit card-only transactions at all times. These types of fees are inclusive of all credit card transactions under a Merchant or Group and can be applied consistently as long as card brand and legal requirements are met.

Example: A Merchant offers cash, debit, or credit as payment options to their customers. To help offset the costs of credit card processing, the Partner applies a 3% surcharge to the Merchant for credit card transactions, and in turn, allows the Merchant to collect the surcharge directly from the consumer at checkout through their platform offering.

Convenience Fees

Convenience Fees are fee charges passed on to customers for the ability to pay for a product or service using an alternative payment method that is not standard for a business.

Example: A Merchant can state that they traditionally accept cash or check only, and offer the convenience of paying with a “non-traditional” method (credit card), which the Partner collects and keeps or profit shares with the Merchant. This fee can also be collected directly from the consumer at checkout through the Partner’s platform offering.

Generally, a convenience fee cannot be implemented in in-person settings (such as physical card terminals). Typically, this refers to internet and over-the-phone transactions.

Service Fees

Service Fees are actually a type of convenience fee that comes with specific rules and regulations resulting from certain limited qualifying MCCs, as opposed to a general convenience fee mentioned above where the fee can be assessed generally for alternative payment method usage. For comparison, we will classify Service Fees under Convenience Fees.

Example: A Merchant who operates a business classified as MCC 8220 (such as Colleges or Universities) processes a card payment. The associated interchange and processing fees are debited directly from their Partner’s operating account. Then associated fee costs are reimbursed to the Partner’s platform account through a 100% withdrawal of the Merchant’s entire transaction amount and fee cost.

Conclusion

While both Convenience Fees and Surcharges are similar in their setup and collection processes, there are important legal and compliance distinctions as well as different requirements for when each fee type can be applied.

Convenience Fees

  • Allowed only on Card-Not-Present transactions.

  • Applies to alternative payment methods from the Merchant’s standard payment options.

  • The fee is a flat or fixed amount.

  • Applicable to credit and signature debit.

  • Disclosed before the completion of the transaction and the cardholder is allowed to cancel.

  • Included as part of the total sale.

  • Allowed on credit and signature debit.

Note: The Convenience Fee requirements listed here are based on Visa’s rules, as they are the strictest. Other rules apply if accepting only Mastercard and American Express.

Surcharges

  • Allowed on Card-Not-Present and Card-Present transactions.

  • Applicable only to credit cards, not debit.

  • The fee is a percentage of the sale.

  • Cardholder Disclosure of Surcharge policy required.

  • Disclosed before the completion of the transaction and the cardholder is allowed to cancel.

  • Included as part of the total sale.

  • A 30 days' notice must be provided to the Mastercard card brand network, Worldpay for Platforms, and/or the acquiring bank before starting to surcharge.

  • Merchants must complete registration directly with Mastercard.

  • Surcharges are prohibited in some states.

Important!

Surcharges and convenience fees cannot be applied on the same payment.