Businesses

Can Businesses Charge Credit Card Fees To The Consumers?

Businesses are charging credit card fees to the consumers. The more we are advancing towards the future, the more we are accepting new payment methods. When it comes to new and advanced payment methods, we must say that credit card and debit card machines are inextricable parts of it. Well, we often say that technology is helping us by making our lives easier than before. But, are these modern payment methods really problem-free? Let us give you an example:

So, you are standing in front of a payment terminal paying with your credit card. The merchant on the other side says that credit card transaction comes with an additional charge. This additional charge is called convenience fee or service fee and is this really legitimate?

According to the merchant rules of MasterCard, American Express, and Visa. Merchants generally cannot charge any convenience fee or service fee while accepting card payments. Still, there are certain types of transactions for which MasterCard, American Express, and Visa allow the eligible merchants for charging service fees which is also called convenience fee.

According to the merchant rules, that fee must be revealed to the cardholders before the transaction gets completed. Moreover, cardholders have the authority to cancel the transaction without giving any penalty. Merchants may select to offer discounts for various types of payment methods.

We have also made a brief breakdown of the credit card fee or service fee. So, if you want to know more about this, go through the following points:

What Service Fee Is and When It Is Charged?

When a consumer purchases any goods or services, the merchant generally incurs his or her bank cost on the consumer in order to process the payment. As most merchants are not eligible for incurring service fees in Canada, they cover it by charging a higher price for their services or goods.

On the other side, eligible merchants impose a charge which is called service fee or convenience fee and this fee can be imposed on any card-based transaction such as credit card or debit card transactions.

Service charges can be imposed on specific types of transactions. But, here, credit card payment services or online bill payment services are not related to it. Basically, cash-based businesses such as ATM operators are eligible to charge a service fee.

Rules That Merchants Need To Follow To Charge A Service Fee

Well, it is a fact that most merchants in Canada are not allowed to impose any additional charge to the consumers. They generally do it because they want to cover the cost that a merchant needs to pay in order to process your payment.

However, there are some merchants who are eligible to legally charge service fees on particular types of transactions in Canada. Well, they need to follow certain rules for that and here, we have added certain aspects related to it. So, have a look at the following points:

  • Each card provider has its own set of rules. If we talk about Visa, it allows utility companies, childcare businesses, post-secondary institutions, and real estate agents to impose a service fee for cardless transactions. Generally, this service fee is capped at around 1% to 1.5%. The whole matter depends upon the cards (credit card or debit card) that are being used by the consumers for making the payments online.
  • If there is any service fee, it will be notified to the consumer before entering the PIN.
  • If there is any fee, customers can cancel the transaction and for that, they don’t have to pay any charge.

Various credit card networks such as Visa and MasterCard are there in Canada. Policies on merchant’s eligibility to charge service fees are different for different credit card networks. Each network has its own set of MCCs that is also known as Merchant category Codes representing the types of wholesalers, retailers, and businesses. For example, we can talk about large stores such as Walmart that fall under more than one merchant category codes. Networks allow merchants to charge service fees if they fall under MCCs.

How Consumer Can Avoid Paying Credit Card Service Fees

If any merchant is legally imposing a service fee, you can avoid paying it by following the below-mentioned tricks:

  • There are different types of payment methods available now and for avoiding the service fee, you have to go with traditional payment methods such as paying with cheque or cash.
  • Before purchasing anything, you should check the ATM operator or merchant whether it is charging any service fee or not.
Best Credit Card Processing Company In Canada

If you are a merchant, you should know that sometimes going with a reputable payment processor can help you to get rid of additional processing fees. In such a case, you don’t need to impose any service fee on the consumers. So, if you are looking for any payment processor in Canada, we will suggest you go with International Payment Solutions.

With an MBA Dual Specialization in Finance and Marketing, this is Debanjan Mukherjee from India. I have got more than 7 years of experience in the field of content development and have extensive working experience in top corporate houses like Pwc and Zacks Investment Research. My skill set includes SEO Writing, Content Writing, Blog Writing, Web Content & Research Articles. I believe in taking things to the next level.