Introduction

The purpose of this guide is to familiarize users with convenience fee processing, ways of convenience fee handling within the system and the role of a cost processor in convenience fee and transaction processing.

Intended Audience

This guide will be useful for administrative users who configure fees for merchants and set up convenience fees for transaction processing.

Convenience Fee Overview

In the past, processing cost was paid exclusively by merchants, but in some industries, merchants accepted only direct debit and check payments because there was minimal or no cost associated with processing (for example, utility and energy payment processing services or property management services). These merchants were not willing to accept credit cards for payment due to associated processing cost. Thus, at some point, credit card associations decided to allow merchants to surcharge additional fee to cardholders to cover the cost of processing, thereby, making credit card processing available. Also, additional fee could be charged for cases when a credit card payment was considered as an alternative or more convenient way to pay for a service (for example, if payment is accepted not personally but by a phone call). This surcharge was called convenience fee.

Convenience fee is a so-called service fee that is charged to a cardholder along with the credit card or direct debit transaction amount for provided products or services. Review this article to learn more about convenience fee concept.
Generally, convenience fee is kept by a service provider that facilitates the payment (payment gateway, processor, etc).

Handling of convenience fee depends on how funding is performed. There are two primary ways in which funding can be arranged:

• by a processor directly;
• by a gateway or payment facilitator associated with the gateway.

Convenience fee can be defined in two ways: as a percentage of the total transaction (for example, 2.5% + 10 cents) or as a surcharge over cost (for example, processing cost + 0.5% + 5 cents per transaction).
In the first case, you ignore processing cost and charge overall fee, sufficiently high to cover the actual cost.
In the second case, the processing cost is included and you only charge whatever extra you want to collect over this cost. When processing cost is included, convenience fee is surcharged from processing cost, and it has to be calculated for each transaction individually. For this purpose, a specific service, which calculates processing cost, can be used (for example, Noble).

For convenience fee to be surcharged from processing cost, a provider profile for processing cost calculation has to be configured for an associated merchant. To learn how to do it, review this tutorial.

Convenience fee handling can be organized in two ways: as a separate transaction or included in the actual transaction:

• Convenience fee amount is processed as a separate transaction. In this case, the actual transaction is processed using MID of an associated merchant and a transaction with convenience fee amount is processed as a separate transaction through a separate MID, i.e. two separate merchant MIDs are used. The merchant used for processing of convenience fees only is called fee processor. In this case, convenience fee will be covered by the gateway. To learn how to create a fee processor, review this tutorial. If fee processor is used, only one sale/sale-auth API call is submitted. The system will automatically send convenience fee within feeAmount field for processing with a different merchant MID.

Note: It is important to know that every merchant ID is associated with a certain merchant category code (MCC) used for classification of products and services that a merchant provides. Convenience fees are not allowed to be processed under certain MCCs. For example, supermarkets that sell consumer goods are not allowed to charge convenience fee.

• Convenience fee amount is included in the actual transaction. In this case, convenience fee can be handled in two ways:

1. Merchant is funded by payment facilitator (through the gateway) and distributions module is used. For example, if net amount of the transaction is $100 and calculated convenience fee amount is $5, one transaction of $105 is processed. Thus, the merchant will receive the exact amount that was paid by a cardholder. After the transaction is processed, during remittance process, $5 will be withheld by the gateway for subsequent payment of convenience fee.
2. If merchant funding is not done through the gateway, the actual transaction and a transaction with convenience fee amount are processed using same MID of an associated merchant. Both amounts are processed in one transaction and sent to the merchant, and convenience fee will be paid by a merchant by themselves.

Whatever approach is used for convenience fee handling, the convenience fee amount needs to be calculated and provided to a cardholder for approval or possible denial. The convenience fee amount is represented by feeAmount field in the respective API call. Once it is approved, the fee amount needs to be added to the actual sale/sale-auth operation via API.

Convenience fee can be set up in the gateway. To learn how to do it, review this tutorial.


Cost of processing can vary depending on a transaction amount, i.e. the bigger amount is, the lower cost of processing is. For this case, different convenience fees can be set up for different tiers of transaction amounts. For example, for transactions between $0 and $100 convenience fee will be 2.5%, for transactions between $100 and $500 - 2.25%, and for transactions over $500 - 1.88%.
If customers mostly pay the same amount (for example, if you provide only one service that costs $50), you can set only one tier from $0 to $20 000 (or you can select any preferable amount that is bigger that your standard transaction) and set convenience fee for it.

Use Cases

Let’s consider an example in which we want to process a $100 transaction with a convenience fee amount is $5. When we set up a convenience fee for a particular merchant’s transactions, there are three ways of convenience fee handling:

• $105 ($100 from transaction amount and $5 of convenience fee) is processed as a single transaction and goes to a merchant. In this case, cost of processing fees is paid by merchant.
• $105 ($100 from transaction amount and $5 of convenience fee) is processed as a single transaction, but $100 goes to a merchant, and $5 goes to the gateway. In this case, funding mechanism is involved and cost of processing fees is paid by gateway.
• Both $100 and $5 are processed as separate transactions - $100 is processed through an account and $5 is processed by specific account within the gateway. In this case, cost of processing fees is paid by gateway without funding mechanism involved.

We will review these use cases in more detail below.

Convenience fee handling through one transaction (without funding)

Let’s review a situation when a merchant wants to process payments as single transaction and handle a convenience fee without gateway interference.

We will include the following conditions:

• 1.85% convenience fee rate must be applied to the amount between $0 and $100;
• 1.60% convenience fee rate must be applied to the amount between $100 and $1000;
• 1.45% convenience fee rate must be applied to the amount more than $1000.

In this case, the scenario of actions will look as follows:
1. Convenience fee should be set up within the gateway. The convenience fee rate should be 1.45% (To learn how to do this, review the respective tutorial)
2. On Convenience Fee form, conditions for transaction amount fee charge should be set up.
3. If convenience fee is included in processing cost, Processing Cost value should be set as Include. If convenience fee is not included in processing cost, Processing Cost value should be set up as Ignore.
Note: If you include convenience fee in processing cost, a respective processing cost provider should be set up.

After convenience fee configuration is done, transactions are processed with convenience fee included. In this situation, sale/sale-auth and convenience fee will be processed through one merchant ID.

To process a transaction via API, the steps should be the following:

1. The respective request for convenience-fee calculation is submitted.
2. Once the response is retrieved, feeAmount value needs to be extracted from the response.
3. To process a sale/sale-auth transaction with convenience fee included, feeAmount value is added additionally to the total amount of the transaction in the respective request. Sale and sale-auth transactions with convenience fee are available only if a cardholder has approved the transaction to be made.

Convenience fee handling through one transaction (with funding)

Let’s review a situation when a merchant wants to process payments as a single transaction and handle convenience fee within the gateway using a remittance. This situation is recommended for cases when a merchant does not want for cardholders to know that some kind of fees are charged to them.

Note that distribution module within remittance process must be enabled with respective settings for a merchant.

To learn how to handle this situation, review Funds Distribution Guide.

Convenience fee handling through a separate transaction

Let’s review a situation when a merchant does not want cardholders to know that additional fees for processing are charged and wants a convenience fee to be handled by the gateway in a separate transaction.
Note that in this case, a fee processor must be set up (if a merchant needs a separate fee processor for each account) or assigned (if there is one fee processor for a group of accounts).

We will include the following conditions:

• 2% convenience fee rate must be applied to the amount between $0 and $100;
• 1.80% convenience fee rate must be applied to the amount between $100 and $1000;
• 1.65% convenience fee rate must be applied to the amount more than $1000.

In this case, the scenario of actions will look as follows:
1. A new merchant with fee processor settings must be created. (To learn how to do this, review the respective tutorial) If a fee processor already exists, this fee processor should be assigned to a desirable merchant.
2. On Convenience Fee form, conditions for transaction amount fee charge should be set up.
3. If convenience fee is included in processing cost, Processing Cost value should be set as Include. If convenience fee is not included in processing cost, Processing Cost value should be set up as Ignore.
Note: If you include convenience fee in processing cost, a respective processing cost provider should be set up.

After convenience fee configuration is done, the convenience fee will get charged separately from the actual payment. In this situation, sale/sale-auth and convenience fee will be processed through different merchant IDs.

To process a transaction via API, the steps should be the following:

1. The respective request for convenience-fee calculation is submitted.
2. Once the response is retrieved, feeAmount value needs to be extracted from the response.
3. To process a sale/sale-auth transaction with convenience fee included, feeAmount value is added additionally to the total amount of the transaction in the respective request. Sale and sale-auth transactions with convenience fee are available only if a cardholder has approved the transaction to be made.