Payment Processing > Convenience fees vs Surcharge Fees

It's important to understand the difference between Convenience fees and Surcharges. Easy HOA opted to only support Convenience fees within the software and not Surcharges. The following will help explain why.

What is a Surcharge Fee?

After recent court rulings in the surcharge vs convenience fee debate, there are ten states and one jurisdiction where surcharging still isn’t allowed at all: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas, and Puerto Rico. In all other states, you can add a surcharge, but you need to make sure you follow the letters of the law and the rules set forth by Visa, Mastercard, American Express, and Discover.

In general, you must post notifications at the point of sale letting ownerss know that they’re going to pay a surcharge. Your sign also needs to specify the amount of the surcharge fee. It’s worth noting that you can never profit from this fee, meaning that it cannot exceed the actual amount you’ll pay on the backend. In fact, the fee is usually capped at 1.3% to 3.5%, so it may not cover your processing costs in full especially since there are additional fees that occur when there are chargebacks or failures.

What is a Convenience Fee?

A convenience fee is charged to buyers who choose electronic payment, like a credit or debit card, over a standard payment option, like cash, check, or ACH transfer. Like a surcharge, a convenience fee can be used to help recoup backend processing costs.

A convenience fee can cover processing costs, but it can also help cover the cost of running an online portal or taking payments over the phone. Because of that, HOA's have the freedom to set their own fee.

Surcharge vs. Convenience Fee: Pros and Cons

When it comes down to surcharge vs convenience fee, it’s important to note that either option increases the cost for your owners and that can discourage them from paying electronically, which usually in turn causes more physical work for the HOA . Here are the pros and cons to consider with these two fees:

• Surcharge fees are lower, but convenience fees cover more. convenience fees are more flexible because you can set the amount yourself. Of course, owners will always prefer the lower fee (i.e., a surcharge fee).
• You need to disclose either fee type up-front. There are more regulations imposed upon surcharge fees, and they aren’t even legal in all states, but you’ll have to disclose either fee to the owners up-front, Which our software does for you within the make a payment page.
• HOAs shouldn’t profit from the fees they charge. You should only charge up to the amount you need to recoup and adjust the fee periodically as your costs change. Because fees are difficult to follow and often require reconciliation, many HOA's are deciding to provide electronic payments as a service and build the cost of fees into the expense budget of the HOA.