What is a Service Fee?

The Service Fee program is a type of convenience fee program that comes with a modified set of rules. It is restricted to merchants within specific merchant category codes (MCC) within the education and government sectors. American Express, Visa and Mastercard offer this type of fee program to these merchants. However, each card brand requires a slightly different set of rules to be followed when processing this type of convenience fee. Visa refers to the Education/Government Convenience fee program as the “Service Fee” program, while Mastercard and American Express call it the “Convenience Fee program,” regardless of merchant category code. The main difference between a Convenience Fee and Service Fee program, besides card brand naming conventions, is that the Service Fee program can only be used by certain limited qualifying merchants.

Summary of the rules for the Visa Service Fee program:

1. Merchant registration is required for the Visa Service Fee program.
2. State and/or Local laws may prohibit merchants from assessing convenience fees. Merchants should consult their legal counsel for restrictions.
3. The fee must be disclosed clearly to the cardholder as a charge for the alternative payment channel convenience.
4. The fee must be disclosed before the completion of the transaction, and the cardholder is given the opportunity to cancel.
5. The service fee can be charged by a limited number of merchants under certain category codes. These codes include Colleges/Universities, Courts Fines, Misc. Government, and Taxes.
6. The fee can be charged on in-person payments or recurring/installment payment transactions. Examples of recurring charges include, but are not limited to, insurance premiums, subscriptions, internet service provider monthly fees, membership dues, and utility charges.
7. The payment and service fee must be submitted as two separate transactions when using a third-party to charge the fee for card not present transactions. In all other scenarios, a single transaction can be submitted.
8. A variable service fee may be charged to consumer credit and commercial transactions.
9. The fee can be charged by the merchant or third-party service provider that provides goods or services to the cardholder.
10. The fee amount can be a flat amount, percentage, or tiered, based on the transaction amount.
11. The service fee may be different for each payment type, such as debit cards, credit cards, ACH, or eCheck.
12. The service fee is not required to be printed on a transaction receipt.
13. For Debit, Credit, and Commercial cards, the service fee must be the same for all consumer and commercial cards, regardless of card brand type, such as Visa, Discover, MC, and so on.
14. The fee can differ across payment channels, such as Web, phone, and point-of-sale (POS).

Contact your merchant services provider if you would like to register for the Service Fee program.