What are credit card transaction fees?

It is legal to charge a credit card processing fee in 40 out of 50 states if it’s a surcharge and in all states if it’s a convenience fee. A surcharge is an added cost just for using a credit card, while a convenience fee is a charge for doing a transaction that’s unusual for the merchant (e.g. over the phone). You’ll usually have to pay convenience fees on things like taxes and tuition, too. Credit card networks also restrict the cases where fees are acceptable. For example, businesses must clearly display any surcharges or convenience fee before a transaction takes place. In other words, they can’t add it on without your knowledge.... read full answer
Here’s what you need to know about the legality of credit card processing fees:
• There are two types of processing fees: convenience fees and surcharges.

• Convenience fees are for doing a credit card transaction in a way that’s not typical for the business (e.g. over the phone when they usually accept in person).

• A credit card surcharge is a fee just for using a credit card instead of another payment method.

• 10 U.S. states outlaw credit card surcharges: Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas.

• Merchants must always clearly disclose both types of credit card processing fees at the point of sale. If they add one without your knowledge, you should call your credit card network to complain.

• Merchants are allowed to charge no more than 4% of the purchase amount or the actual cost of processing your card, whichever is lower.
Battles about surcharges have even gone to the Supreme Court, which upheld New York’s right to ban them. Be sure to look up your state’s policy. You should also know that if you get a refund on a purchase for which you had to pay a surcharge, you get your surcharge money back too.

Credit card processing fees most commonly refer to the price merchants have to pay to accept credit card payments. Credit card processing fees typically range between 1.5% and 3.5% of each transaction. Cardholders rarely have to pay processing fees for using credit cards, but there are certain vendors and service providers that impose them. Cardholders may also have to worry about processing fees when issuers charge administrative fees for processing credit card applications. These fees are more common with unsecured cards aimed at people with damaged credit.... read full answer

Here's what you need to know about credit card processing fees

• Merchant processing fees: The fee merchants pay for accepting credit card payments and receiving service from acquiring processors is known as a merchant discount rate. This is usually between 1.5% and 3.5% of each transaction and it has several components: interchange fees, assessment fees, and markups.
• Chargebacks: Aside from the merchant discount rate, merchants may also be subject to chargebacks. If someone disputes a credit card charge, the issuing bank makes a "retrieval request" and charges the merchant a penalty fee. The merchant may appeal, but if the issuer rules in favour of the cardholder, they will recover, or charge back the customer's payment.
• Credit card surcharges and convenience fees: These are fees imposed by some merchants when customers use a credit card to pay at checkout. They are governed by state laws, credit card networks, and issuers. These are more common with government agencies or certain companies, when paying taxes or certain bills. You can avoid these by using your bank account to make ACH transactions, or by paying in person. Alternatively, you can avoid merchants that apply them.
• Application/Processing fee: Some issuers impose administrative charges to cover the cost of evaluating a credit card application. While rare, some credit cards aimed at people with damaged credit still charge these fees.

While processing fees are generally costs associated with merchants, cardholders should be aware of other types of credit card fees and learn how to avoid them.