What is a 'Surcharge'
A surcharge is a fee or other charge that is added to the cost of a good or service. A surcharge is typically added to an existing tax, and may not be included in the stated price of a good or service. It may be a temporary measure to defray the cost of increased commodity pricing, such as with a fuel surcharge, or it may be permanent.
BREAKING DOWN 'Surcharge'A surcharge does not have to be imposed by the government. Businesses use surcharges to shift additional costs to consumers. For example, when gas prices are high, taxi companies may add a fuel surcharge of $1 to cover the increased fuel cost. Some surcharges are not included in the listed price of a good or service, requiring consumers to pay attention to the final bill or risk paying more than they expected.
Surcharges may be set at specific dollar amounts, such as $5 per transaction, or based on a percentage of the total price for the associated goods or services prior to taxes being assessed.
Many industries, such as the telecommunications industry, regularly use surcharges to offset fees imposed on the business through federal, state or local regulations. When regulations change the costs for the business, the business can adjust the fee instead of adjusting the cost of the good or service directly.
For example, a customer may see a regulatory recovery fee on a cable bill. The purpose of the regulatory recovery fee is to offset the burden on the cable provider for certain voice service fees imposed by various government entities. If regulations raise the burden on the company by $1 per customer, the company can raise its regulatory recovery fee by $1 to avoid having to absorb the loss, by passing on the additional cost to the consumer.
Surcharges as Convenience Fees
One surcharge experienced by many consumers are ATM fees associated with using a particular network’s ATM. The ATM surcharge is most often levied by the bank or other institution that owns and operates the machine, and is generally listed as a set dollar amount per transaction. While all ATMs may technically have fees associated with their use, these surcharges are often waived for customers of the specific ATM network represented through the machine.
Some businesses have added surcharges to compensate for the costs associated with accepting credit cards. This additional fee may be a specific dollar amount or may be based on a percentage of the total price for the goods or services being acquired.