Can a customer be charged a fee for paying with a credit card?

There are many misconceptions as to whether merchants can charge a "service" fee or surcharge when a customer pays using a credit card. Currently, the answer in Canada is typically no, a merchant cannot charge a service fee when a customer uses a credit card to pay (unless in very specific situations). However, that is changing.

A settlement deal between VISA, MasterCard, and merchants means that effective October 6, 2022, merchants will be able to pass their fees (or a portion of their fees) on to the customer. There are a few parameters concerning what those fees are and how they work.

Credit card merchant agreements, as well as applicable laws, require that the fee being charged to the customer is clearly disclosed prior to the transaction being done, and the customer has the right to cancel the transaction without penalty when they find out what the fee is. As for the amount of the service fee, it cannot be greater than the fee the merchant pays to the credit card company for that specific transaction, and in no event can it be more than the maximum cap set by the credit card company, which in the case of MasterCard is set at 2.4% of the purchase price.

It is important to note that this service fee is not allowed for debit cards or prepaid credit cards.

While traditionally (prior to October 6, 2022), a service fee has not been allowed to be charged, merchants can give customers a discount for using a different method of payment, and that rule will continue to be in effect.

When returning an item, the customer is to be refunded both the purchase price and the service fee, or if only a portion of the purchased items is returned, the service fee is refunded for the corresponding portion of the total amount refunded.

Merchants intending to begin charging a service fee will need to ensure that they are meeting the requirements set out by the credit card companies, including notification to the credit card company of their intention to implement a service fee. MasterCard requires that merchants provide at least 30 days' notice, and on September 6, 2022, MasterCard will enable an online merchant notification form for interested merchants to complete.

If you have questions regarding credit card fees or any other legal matters, reach out to the experts at Getz, Collins & Associates at 403.934.2500 (Strathmore office), 587.391.5600 (Calgary office) or online at www.getzcollins.com. Local lawyers who care.

The information contained in this article is provided for informational purposes only and should not be construed as legal advice on any subject matter.

 

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