Many consumers can relate to the frustration of having to pay an additional fee when using a credit card. The precious cash back or rewards that you’ll earn are negated by that extra cost. Some merchants charge such a convenience fee, while others do not, which leads consumers to wonder what justifies such a practice.

Quinn Dombrowski / Flickr |

Quinn Dombrowski / Flickr source

Q: There is a local nail salon that I frequently visit, and I usually have cash on hand. But, this one time, I had to use a credit card and I discovered that the salon added a $1 convenience fee to the $15 charge. Can they do that? I don’t see my local drugstore do something like this for a small amount.

– Bonnie S.

A: Technically, convenience fees are applied when a consumer uses an alternative payment channel. For instance, a college student or parent may face a convenience fee when using a debit or credit card to pay a tuition bill online or by telephone (as opposed to mailing in a check).

A convenience fee is different from a surcharge, which is an added charge for the privilege of using a credit card, instead of a debit card or cash.

When a small mom-and-pop shop slaps on a small “convenience fee” for an in-store purchase with a credit card, it is likely confusing the term for a surcharge. Under a 2012 ruling, merchants cannot impose a credit card surcharge of more than 4 percent of the transaction.

A flat $1 surcharge would be illegal on a $15 purchase since it exceeds the maximum surcharge limit of 4 percent. Also, credit card surcharges are prohibited in California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas.

However, merchants are allowed to provide discounts for payments in cash, which is commonly seen at gas stations. The rule is that they must display prices for both credit card and cash payments together.

If the salon has presented a price list for the two different payment methods, it followed the rules. If it didn’t, that “convenience fee” should not be allowed.

Credit card networks tell consumers to report businesses that impose illegal surcharges to their state’s attorney general.

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