Are Credit Card Convenience Fees Legal?

The fees are legal, but you must first be alerted to them — no surprises allowed. Laws also vary by state.
Erin El Issa
By Erin El Issa 
Published

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We love credit cards around here, especially those that provide our readers (and ourselves) with awesome benefits. However, sometimes using a credit card may cost more than the benefits provided. Case in point: credit card convenience fees and surcharges.

What are convenience fees and surcharges?

A convenience fee is a charge incurred for the privilege of paying for something with a payment method that would normally not be used for such a product or service. For example, it’s common to be charged a convenience fee when you pay for college tuition or taxes with a credit card, instead of with a check or automatic withdrawal from your checking account. Convenience charges may also be levied if you call and make a bill payment over the phone instead of mailing in a check or paying online.

Note: A convenience fee isn’t the same thing as a surcharge. A surcharge is the cost associated with using a credit card on a transaction. Generally, a charge incurred at a store is a surcharge, although it may be incorrectly labeled as a convenience fee.

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Are convenience fees/surcharges illegal?

Convenience fees and surcharges are legal, as long as they stay under a certain percentage of the purchase price and aren’t assessed in a state that bans them. Because “convenience fees” in shops are usually incorrectly labeled surcharge fees, let’s examine legal surcharge limits.

A surcharge over 4% of the purchase price is illegal and any surcharges are illegal in 10 of the 50 states — California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas. If you live in any of these states and are charged an illegal surcharge, report the retailer to the state attorney general’s office.

Whether you are paying a convenience fee or surcharge, it’s only legal if the payee alerts you to the fee. For example, it would be illegal for a shop to ring up your purchase and charge you a surcharge without letting you know about it. There must be a sign displayed outside the store stating a surcharge exists for credit card purchases and a notification of the amount of the fee at the point of sale.

How can I avoid them?

If convenience fees and surcharges are legal in your state, carry alternative payment methods that are more widely accepted — like cash, checks and/or debit cards. Any credit card points you earn will likely be negated by these fees, unless you are in the signup bonus period. Even so, it would be better getting your signup points elsewhere and not paying convenience fees or surcharges unless you absolutely have to.

Using cash and debit cards can actually save you money in some cases. Some retailers are allowed to encourage you to use these payment methods by offering a small discount. You’ve likely seen this in cash prices at the gas station, which are generally 5 to 10 cents lower than credit prices.

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