You may have noticed something called a "convenience fee" on your last restaurant bill. When listed among other charges, it can be confusing to understand what exactly the fee is for and who it goes to. We'll explain exactly what it is and how you may avoid the fee. Plus, we'll let you know which credit card will cause you to pay the highest fee.
Advertisement

Have you ever gone to pay a bill online with a credit card, only to find that you'll be charged a "convenience fee"? While you may have thought it was the convenient thing to be paying with a credit card instead of mailing a check or other methods, these fees are becoming common in restaurants too. Here's everything you need to know about convenience fees.

What Is a Convenience Fee?

A convenience fee is charged by a seller when the customer uses a credit card instead of a standard form of payment accepted by the business, such as cash or check. A convenience fee is typically a percentage of the transaction amount (usually 1% to 4%), or a small flat fee, and must be disclosed to the customer.

But restaurants aren't the only places where you might get hit with a fee! Convenience fees are also frequently charged when ordering food or goods via a delivery app, purchasing concert or movie tickets online, making tuition or mortgage payments and more. Since there's not a way to pay cash for those services online, it's likely unavoidable in many scenarios.

a photo of plate with receipt and a credit card
Credit: Getty Images

Why Do Restaurants Charge a Convenience Fee? Where Does the Money Go?

Convenience fees are charged by restaurants to cover fees associated with an alternative payment method, such as a credit card. Though the convenience fee is collected directly by the business, it goes toward offsetting the fees they are charged by credit card processing companies.

Drugstores, convenience stores and gas stations may have a posted sign informing customers of a minimum purchase amount to use a credit card in an effort to avoid being charged fees on small transactions. The minimum purchase amount can vary from business to business, and some may even offer a cash discount if you avoid using a credit card all together. Such signs and practices are less likely at restaurants.

Is It Different from a Service Fee?

While looking at your bill, you might also see a service fee listed. This is different from a convenience fee and, charged at the restaurant's discretion, is designed to go straight to servers and staff. Typically around 3%, according to the Los Angeles Times, the service charge is meant to go toward benefits like insurance and health care for employees. However, a service fee is not charged in place of leaving a tip. When a service fee is charged, you'll likely see a note explaining its purpose directly on the receipt or menu.

Is It Taxed?

The amount of the convenience fee is not taxed. However, the restaurant is charged a processing fee on the total charge paid by the customer, which includes the subtotal, tax and possible convenience fee.

Which Credit Card Companies Charge Convenience Fees?

Major credit card companies charge processing fees for merchants to use their services, which range from 1.25% to 3.3% of each transaction. The exact amount depends on the company, what credit card you're using and the merchant services provider used. For example, these credit cards are listed in order from the least to the most costly fee:

  • Visa: 5 cents per transaction plus 1.5% of total, up to 10 cents per transaction plus 3.15% of total
  • Mastercard: 5 cents per transaction plus 1.25% of total, up to 10 cents per transaction plus 3.15% of total
  • Discover: 5 cents per transaction plus 1.35% of total, up to 10 cents per transaction plus 2.4% of total
  • American Express: 10 cents per transaction plus 1.43% of total, up to 10 cents per transaction plus 3.3% of total

Debit cards follow a different pricing model, but usually don't cost as much for merchants, which is why convenience fees typically only apply to credit card purchases.

Can You Avoid Paying a Convenience Fee?

When you sit down to dine, ask your server if they charge convenience fees for credit card transactions so you can head to an ATM instead. Paying with cash, or whatever the preferred payment method of the business is, will likely be the easiest way to avoid paying a convenience fee. Plan ahead and go to an ATM that belongs to your bank, or else the ATM fee may negate the savings from avoiding the restaurant's convenience fee.

Some smaller businesses (like food trucks or stands) may not even accept credit cards to avoid hefty processing fees. Depending on the customer, this can be a turnoff or something they happily go along with.

Bottom Line

Convenience fees are not the same as tips or surcharges. They're charged to businesses like restaurants when their customers use a credit card to pay for service or product, and the restaurant passes the cost of that fee on to the consumer. This is why it may appear on your bill. The best way to avoid convenience fees is to plan ahead and pay in cash when possible.

If you're feeling the crunch of inflation, try these 10 expert-approved tips to save on groceries, and avoid dealing with a convenience fee after your next meal altogether.