What is a Convenience Fee?

When it comes to buying goods and services online or via phone, you may have come across the term “convenience fee”. This fee is a charge that is added to the cost of the product or service you are purchasing to cover the cost of processing your payment. Convenience fees are often used by businesses to offset the costs associated with providing customers with the convenience of making a payment online or over the phone.

Why Do Companies Charge Convenience Fees?

Convenience fees are charged by companies to help cover the cost of processing payments. When you make a payment online or over the phone, the company that you are purchasing from incurs a cost to process that payment. This cost can vary depending on the type of payment method used, the amount of the payment, and other factors.

For example, if you pay using a credit card, the company will be charged a fee by the credit card processor for processing that payment. Similarly, if you pay using a mobile wallet such as Apple Pay or Google Wallet, the company will be charged a fee for processing that payment.

Types of Convenience Fees

There are several different types of convenience fees that companies may charge. These include:

1. Credit Card Convenience Fee – This fee is charged when you make a payment using a credit card. The fee is usually a percentage of the total amount of the transaction.
2. Debit Card Convenience Fee – This fee is charged when you make a payment using a debit card. The fee is usually a flat fee or a percentage of the total amount of the transaction.
3. Mobile Wallet Convenience Fee – This fee is charged when you make a payment using a mobile wallet such as Apple Pay or Google Wallet. The fee is usually a flat fee or a percentage of the total amount of the transaction.
4. Online Payment Convenience Fee – This fee is charged when you make a payment online. The fee is usually a flat fee or a percentage of the total amount of the transaction.

Are Convenience Fees Legal?

Convenience fees are legal as long as they are disclosed to the customer before the transaction takes place. The Federal Reserve Board’s Regulation II, which implements provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, allows merchants to charge a fee for payments made using a debit card if the fee is disclosed to the customer before the transaction is completed.

Similarly, the Visa and Mastercard merchant rules allow merchants to charge a fee for payments made using a credit card as long as the fee is disclosed to the customer before the transaction is completed.

How to Avoid Convenience Fees

If you want to avoid paying convenience fees, there are several things you can do. First, you can choose to pay using a payment method that does not incur a convenience fee, such as a bank transfer or a check.

Second, you can look for businesses that do not charge convenience fees. Not all businesses charge convenience fees, so it is worth shopping around to find those that do not.

Finally, you can try negotiating with the business to waive the convenience fee. While not all businesses will be willing to do this, some may be open to negotiation if you are a loyal customer or if you are making a large purchase.

Conclusion

Convenience fees are a way for businesses to offset the costs associated with processing payments made online or over the phone. While these fees are legal as long as they are disclosed to the customer before the transaction takes place, there are several ways to avoid paying them. By choosing payment methods that do not incur a convenience fee, shopping around for businesses that do not charge convenience fees, or negotiating with businesses to waive the fee, you can save money on your purchases.