Many forward-thinking law firms have come to realize that consumers’ preferred forms of payments are credit cards, debit cards, and ACH payments. They prefer to use their cards everywhere–online, over the phone, and in person. As a result, these law firms have modernized their practices and are now accepting credit/debit cards and ACH payments for their services. If your firm accepts credit cards, you must pay processing fees on transactions like all merchants. Fees may vary by processor, but there is no way around having to pay them. However,  there are ways that may lessen the blow. Some professionals have started adding transaction fees to offset some of the merchant processing fees charged to their practice.

Perhaps your firm is thinking about charging a transaction fee, but it is uncertain how to do so in a compliant manner. Maybe your firm is already charging fees, but you’re not sure if you’re doing it correctly. We’re going to lift the fog and provide clarity on “what is the difference between a Surcharge and a Convenience Fee?” Although some individuals believe a surcharge and a convenience fee are the same and use the terms interchangeably, they are, in fact, different, and their misuse may have legal ramifications.

The quickest explanation of how they differ is: “follow the money”. 

Surcharges are applied when a fee is charged to clients for using a credit card to pay for a service or product. This allows a business to recoup some of the payment processing fees.  The fee goes to offset processing charges and reduce expenses. How much and how you go about charging a surcharge will depend on your state’s laws.

Convenience Fees are standardized fees applied when customers elect to pay by phone or internet rather than by mailing a check or other standard payment method that does not include a convenience fee. Customers are, in fact, paying for the convenience of paying their bills how they prefer. The fee has nothing to do with processing charges and could go to your bottom line. There are state laws that govern the use of  Convenience Fees.

Surcharges can vary based on transaction fees from processor to processor. They are added to the regular price of the service and must be displayed at the time of checkout when a customer is paying their bill. Surcharges must also be clearly displayed on payment receipts. Surcharges may not be added to debit cards or prepaid debit transactions. Visa, MasterCard, Amex, and Discover all have policies in place for how merchants may apply surcharges, and it’s your responsibility to ensure you remain in compliance with their policies. In 2021, it is legal to charge Surcharges in all but 4 US states and one US territory. In the following jurisdictions, you won’t be able to impose Surcharges (at least for now):

  • Puerto Rico
  • Colorado
  • Connecticut
  • Kansas
  • Massachusetts 

At the risk of redundancy, credit card Convenience Fees are different than credit card Surcharges. A Convenience Fee is an older transaction term that originated when credit cards were not as popular. For example, in a time when cash was preferred, but a customer wanted to pay by credit card, a merchant might charge a flat fee for accepting the card. While Convenience Fees aren’t technically related to taking credit cards, some law firms are choosing to use Convenience Fees in spite of some drawbacks. Legally, clients must always have the choice to use another standard method of payment that does not require the added Convenience Fee.  In addition, there are rules and exceptions imposed by the major credit card companies that vary from one card issuer to the next. Plus, state laws must be adhered to in order to remain compliant with the terms of your merchant processing agreement. We recommend you contact your merchant processor and State Bar for a list of rules and regulations that apply to your firm.

While Surcharges and Convenience Fees are ways to offset merchant account fees imposed by your card processor, they are also causing increased complaints by clients who think these fees are unfair. Instead of charging Surcharges or Convenience Fees, you might want to find an alternate solution to reduce the costs associated with your merchant processing. You could increase your pricing and then offer a cash discount. Another thing you may want to do is to consider finding a processing company that has a lower overall cost to process payments. Some reliable merchant processors offer low fees, but not all specialize in the legal profession, ensuring your firm remains compliant with the rules and regulations that govern how the legal profession can accept credit card payments.  One such company is LexActum, providing merchant processing designed for law firms.

At LexActum, there is one simple, transparent fee structure with one low flat rate each month. Beyond that, all you pay are the fixed costs set by, and paid to, Visa, MasterCard, Discover, and American Express. LexActum promises to never markup, or add any hidden fees, such as statement fees, minimum processing fees, customer service fees, batch fees, or any other fees. All of your firm’s processing will be done with a 0% markup on all Visa, MasterCard, Discover, and American Express rates and fees. Set up time is quick and easy. Merchant account applications are processed immediately, and your law practice is ready to process credit card sales within 48 hours. For a free statement audit, or to get started, call LexActum at 321-972-9838.