The ability to take credit card payments is a major need for law firms. 80% of consumers prefer using cards over other forms of payment and more than half of all credit cardholders use their cards for daily expenses. That’s a lot of credit card users.
Credit cards are convenient but they do come with downsides for the payee. The vast majority of credit cards require a processing fee for any transactions. Depending on the cards and banks, fees range between less than 2% and more than 5%.
Payees have two options: incur the fee themselves as a cost-of-doing business or pass the processing fees along to their clients. The latter is denoted on an invoice as a “surcharge” or “convenience fee,” though the compliance requirements may vary by state.
Not all states sanction surcharging customers for credit card fees, though. Consumer protection advocates protest that these fees can be deceptive, aren’t standardized, and inhibit interstate commerce. Currently, eleven states prohibit merchants – and this includes law firms – from pinning a surcharge onto credit card transactions. These states include California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas, as well as Puerto Rico.
From a client experience point of view, some recommend keeping your fees to yourself. Clients are already incurring substantial costs for legal services. However, if your state permits you to pass on credit card transaction fees and you choose to do so, be mindful of ethical obligations. First and foremost, if you surcharge, you’re able to do so up to the amount charged by the processor.
Beyond that, one of the biggest ethical pitfalls is handling trust accounts. In order to stay compliant with IOLTA, you can’t pull credit card fees from trust accounts.
Instead, you’ll have to assess those fees from a separate one, which isn’t possible with all credit card processors. Because of this, it’s important to research and select a credit card provider that allows you to accept credit card payments into trust accounts but also pull fees out of separate operational accounts.