Can Associations Apply a Surcharge on Credit Card Payments?

John Lehman
January 4, 2023

Whenever any business starts accepting credit card payments, they have to pay processing fees. Why? It's simply the cost of moving money within our financial systems.

But as online payments are quickly becoming the dominant way to pay today, you’ll have to deal with these fees sooner or later. Some association leaders manage their processing fees by essentially passing them onto their members, in the form of a surcharge.

In this blog, we’ll discuss what it means to add a surcharge on credit card payments, whether the practice is legal, and most importantly, when and if it’s smart to do it.

What Exactly Does Surcharging Mean?

When it comes to payments, the exact definition of surcharging is charging an additional amount of money with each credit card transaction to make up for payment processing costs—as much as 4 percent.

For decades, surcharging was prohibited across all major credit card brands. However, in 2013, a class action lawsuit against Visa and MasterCards led to surcharging becoming legal.

It’s worth noting that the practice of applying a surcharge on credit card payments is not the same as issuing a convenience fee. They are similar in that merchants can use them to cover the costs they would pay to credit card companies.

However, convenience fees are typically a flat fee and are only available if the method of payment is distinct from the business’ standard payment method. An example would be purchasing movie tickets online instead of buying them at the box office. The theater might charge a convenience fee for those buying their tickets online.

The Legal Status of Surcharging

In some states, surcharging has been outlawed as an anti-consumer practice. As of this writing, Connecticut and Massachutsettes are the only states that have laws prohibiting surcharging. Additionally, Puerto Rico has laws prohibiting surcharging.

If your state does allow surcharging, the major credit card companies require that you follow certain procedures and rules. For instance, you must give written notice of your desire to surcharge to all credit card brands your association accepts. However, if you have an AffiniPay account, this requirement will be handled on your behalf.

The Pros and Cons of Surcharging

Now then, let’s answer the issue we examined at the start of this blog—should associations surcharge?

Of course, it makes sense that you’d like to get your money back from processing fees if you have the ability to do so. However, there are things to consider before you begin implementing a surcharge.

For example, since surcharging is essentially increasing the price of your dues for one method of payment, you may be effectively discouraging your members from paying online. Given how popular online payments are amongst members today, putting this hurdle up in front of your members could result in negative feelings, bad word of mouth or even loss of membership.

Even so, online payments are significantly faster than traditional methods of payments, such as check payments. You could essentially be leaving money on the table by not accepting payments online or by discouraging your members from using them.

However, if surcharging ultimately sounds like the best course of action for your association, there are ways to implement it in a more member-friendly manner.

You might consider adding a new fee into your dues renewal process that makes up for the cost of processing fees. For example, the Kentucky Bar Association decided to add a surcharge of about 2.5 percent to their dues renewal process.

In any case, recent trends have shown that online payments aren’t going anywhere. As time goes on, associations can expect more and more of their members will want to pay online. It’ll be up to you to decide if it’s best to accept processing fees as a cost of doing business today or to add a surcharge to your member’s payments to offset the costs.