New Rules for Surcharges and Convenience Fees
It is important for merchants to be aware that Visa will be performing in-person audits to ensure compliance with network rules regarding surcharges and convenience fees when it comes to minimum transaction amounts for credit card transactions.
According to the regulations set by the Dodd-Frank Wall Street Reform and Consumer Protection Act, merchants operating within the US region or in a US territory are allowed to set a minimum transaction amount for credit card purchases. However, this minimum transaction amount cannot exceed $10. It is important to note that this rule only applies to credit card transactions and does not include debit card transactions.
Visa announced a rule change for merchants assessing consumers for credit card transactions. This rule will cap the maximum surcharge amount at 3.00%. Effective March 1, 2023, the surcharge rate for all new surcharge merchants will be reduced from 3.50% to 3.00% for all card brands and the Visa/Discover/Amex/Mastercard Credit Card Discount Fees will be reduced to 2.9126%.
The following FCS’s on North will be updated and hardcoded to 2.9126%:s
- 804 (VISA)
- 800 (Mastercard)
- 170 (Discover)
- 164 (AMEX)
Merchants should ensure that they are compliant with all applicable rules and regulations to avoid any non-compliance fees that may be assessed by the networks. This includes adhering to the rules and limitations regarding surcharge fees and minimum transaction amounts for credit card transactions. Starting in January 2023, if merchants are found to not be in compliance regarding these new rules, they could be subject to networks fees as follows:
- First Violation - Warning letter to comply
- Second Violation - $5,000
- Third Violation - $25,000
Therefore, it is crucial for merchants to consult with their payment processing provider or legal counsel to ensure that merchants are compliant with all applicable rules and regulations. You can also refer to the document Visa has provided here.
It is up to the discretion of each individual merchant to decide whether or not to impose a minimum transaction amount. Some merchants choose to do so to offset the costs associated with processing credit card transactions, while others do not. It is important to note that some customers may be deterred from making a purchase if they feel that the minimum transaction amount is too high, so merchants should carefully consider the impact of their policies on their customers’ purchasing behavior.
Rules to Follow When Implementing Surcharges and Convenience Fees
- The surcharge amount must not exceed the actual cost of processing the credit card transaction.
- The surcharge must be disclosed to the customer before the transaction is completed.
- The surcharge must be a flat fee or a percentage of the transaction amount, but it cannot exceed 4% of the transaction amount.
- The surcharge must not be imposed on debit card transactions, prepaid cards, or other forms of payment.
It is important to note that some states have laws that prohibit or limit surcharges altogether. Therefore, businesses should consult with their state laws to determine if they are allowed to impose surcharges and to ensure that they comply with all applicable rules and regulations. Worldpay/FIS has provided an additional document to help merchants with considerations and examples here.
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