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Should My Firm Apply Surcharges to Client Credit Card Payments?

By | Jun 25, 2021

As your accounting firm looks to provide an optimal client billing and payment experience and also financially thrive, one situation is often unclear: to surcharge, or to not surcharge?

Yes, you must decide how to cover credit card transaction fees that are costly for your firm, but also may face backlash if your clients are hit with further charges. In addition, your firm must also navigate complex processing expenses, cash discounts, and surcharging laws that vary by state.

In this blog, we provide an overview of what you need to know about surcharging.


What is Surcharging?


Surcharging is when merchants add an additional fee to credit card transactions. This is done to cover processing fees imposed by credit card companies, so that the merchant alone doesn’t have to absorb the cost.


Customers who choose credit cards as a method of payment will assume the cost burden in exchange for the convenience of paying with credit. Surcharge fees cannot be applied to debit cards or cash payments, only credit cards. When implemented, surcharges must only be used to cover processing fees--merchants cannot profit off these additional costs.


Surcharge Policies Vary by State


The number of states that have banned surcharge practices on credit card payments continues to decline, as many legal challenges have led to courts overturning laws that prohibit these practices. As of February 2021, the following states still keep their anti-surcharge laws, although currently those laws are technically deemed unenforceable by the courts:

  • California
  • Florida
  • Maine*
  • New York*
  • Oklahoma
  • Texas
  • Utah

*Merchants in Maine and New York looking to implement surcharge fees must clearly communicate credit card fees at point of sale, or wherever prices are posted. In addition, these merchants must comply with American Express, Discover, Mastercard and Visa specifications, which require businesses to post notifications at the point of sale and specify the amount of the expense.

The following list of US territories and states currently prohibit credit card surcharges:

  • Colorado
  • Connecticut
  • Kansas
  • Puerto Rico
  • Massachusetts

There are no pending court rulings to put this issue into limbo or allow for different interpretations. In the above states, surcharge pass-thru is strictly against the law.


What are some alternatives to surcharging?


If your firm is located in a state where it is illegal to impose a surcharge, or you’re looking for an alternative way to recoup these costly fees, there are other options:

  • Cash discounting is another method used to pass on credit card processing fees to customers. Merchants can encourage customers to pay with cash or check by discounting these transactions. Customers who prefer the convenience of credit cards and opt to pay with credit will assume the transaction cost burden. This practice is legal in all 50 states by the Durbin Amendment of the Frank Dodd Act (2010).

  • Build the transaction fees into your costs. Oftentimes, businesses build fees into their costs to ease the financial burden on the backend.

Should you apply surcharge fees?


With surcharging being such a polarizing topic over the last decade, we’ve dissected some of the benefits and risks associated:



One, really. And it's what you'd expect, i.e. your firm will increase margins--transaction fees are expensive, and businesses can alleviate the financial burden by passing off fees to customers.


    • Are firms similar to yours passing transaction costs to their clients? Are your clients willing to pay this additional fee for your services, when they can pay with credit for free elsewhere?
    • Surcharge fees may carry a stigma with customers--especially if your firm hasn’t introduced surcharging in the past.
    • Roadblock to faster collections--If your firm’s goal is to accelerate the work-to-cash cycle and decrease DRO, this may prove to be a challenge. Some clients may take longer to pay invoices if additional costs are introduced.

Surcharging Best Practices

If your firm is has decided to implement surcharges on credit card transactions, there are a few things to keep in mind:

  • Notify your credit card company and discuss the required steps, including the correct process to avoid any legal problems.

  • Inform your customers of the changes with ample time for them to prepare and ask questions.

  • While we covered the basic laws per state in this blog, be sure to take time to investigate local regulations. This includes any additional requirements from credit card companies.

  • Your firm cannot add surcharge fees to debit card transactions.

  • And lastly, partner with Aiwyn and use our Payments module to deliver a superior client payment experience. Passing along transaction fees to your clients is ultimately your decision, based on your firm’s specific needs and financial goals. Regardless of which option you choose, Aiwyn's payments platform offers your clients an enjoyable, one-click payment experience. By instantly verifying credit card and ACH information, removing the manual aspect of paying invoices, and making it easy for your clients to pay, Aiwyn accelerates cash flow and optimizes your client’s overall experience with your firm. Contact us at info@aiwyn.ai to learn how!

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