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Payment Fee Models

The ultimate decision is whether to absorb the costs and build them into the price advertised,
or to pass them on to customers and advertise a lower price.

In all card transactions there are fees. The merchant ultimately bears the cost, either directly through interchange and service fees or indirectly through built-in pricing models.

The fees can be passed to the customer through surcharges, convenience fees, or dual pricing, but each method has specific legal and operational considerations. Merchants must carefully evaluate their payment processing strategy to ensure compliance with state laws and card network rules while maintaining transparency and fairness for customers.

Model Comparison

Model Applies To Debit Cards Extra / Expense Legal Status Fee Structure Signage
See Below**
Interchange Plus All transactions Allowed Expense All states ✗✗Variable Interchange + Fixed Markup ✓Not Required
Surcharge ✗Credit Only ✗Prohibited Extra ✗Some Banned
(e.g., CT, MA)		 ✗Percentage (capped ~3%) Required
Convenience Fee ✗*Non-standard channels Allowed Extra All States ✗Often Flat Amount Required
Service Fee ✗Gov/Edu/Utility sectors Allowed Extra Eligible Merchant Category Fixed Percentage Required
Dual Pricing ✓All Transactions Allowed Extra All States Fixed Percentage (Added to Base Price) Required
Built-In Fixed ✓All Transactions Allowed Expense All States Fixed Percentage (built into price) ✓Not Required

Interchange Plus

A legacy pricing model where the merchant pays the actual interchange fee plus a fixed markup to the payment processor. This model shows every fee along the payment. However it's difficult to understand for the average merchant and usually comes with extra fees that can change over time without notice, resulting in gradually increasing costs. It is legal in all states.

Interchange Fees

Set by card networks (Visa, Mastercard) and paid by the merchant to the issuing bank. They are non-negotiable, account for 70–90% of processing costs, and apply to all card transactions.

Surcharge

A fee added by the merchant to the customer specifically for using a credit card. It aims to offset processing costs, is capped at the merchant's actual cost or 3%, and is prohibited on debit cards. It is banned in states like Connecticut and Massachusetts.

Convenience Fee

Charged when a customer uses a non-standard payment channel (e.g., online or phone) when a standard alternative (e.g., in-person or mail) exists. It applies to various payment methods, is often a flat rate, and is legal in all states.

Service Fee

Limited to government, education, and utility merchants. It is collected by the Third-Party Processor to cover processing costs and can apply to debit cards, unlike surcharges.

Dual Pricing

Presents two prices: a higher Card Price and a lower Cash Price. It is legal in all 50 states and avoids the negative customer perception of a checkout surcharge.

Built-In Fixed

A single-price model: the merchant posts and charges just one price, with no separate fee shown to the customer. Like Interchange Plus, the merchant pays the processing cost — but instead of a variable interchange-plus markup, the merchant pays a flat, fixed percentage on every transaction.

Surcharge Signage Wording

Visa's sample compliant language is:

“We impose a surcharge of [X]% on the transaction amount on credit card products, which is not greater than our cost of acceptance. We do not surcharge debit cards.”

The three required elements in any surcharge sign:

Placement: at the point of entry and the point of sale, with a minimum 16-point Arial font in-store (10-point online).

Dual Pricing / Cash Discount Signage Wording

A compliant sign typically states:

“All prices reflect the cost of card payment. A [X%] discount is available for cash, check, or ACH payments.”

Key rules:

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