Accepting online payments has become essential for law firms looking to meet client demands and improve cash flow. No one likes paying credit card fees, however. This is where surcharging comes in—passing the cost on to your clients.
Quick Take
- It’s better to accept credit cards and surcharge than not accept them at all.
- Surcharging will significantly reduce the use of credit cards. Consider instead absorbing the fees in order to gain the benefits of faster payments—we typically see invoices paid 15-45 days faster—and increased collected realization rates of 2% to 4%.
- eChecks/ACH are an excellent way to defray the costs of online payments. Our clients average 28% of online payments via eCheck.
- Check for state specific rules below and your state bar before implementing surcharging.
- Make sure you’re using a legal-specific merchant account like PayQ that specifically shows surcharging as an additional line item (and only surcharge your actual costs).
What is Credit Card Surcharging?
Credit card surcharging is the practice of adding a fee to the client’s bill when they pay with a credit card to cover the transaction processing costs. While surcharges are common in retail and service industries, law firms must ensure compliance with state laws and bar regulations, including surcharging only for the actual cost of processing.
Where is Surcharging Allowed for Law Firms?
Surcharging is permitted in most U.S. states, but certain jurisdictions have restrictions:
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- Connecticut, Maine, Massachusetts, Puerto Rico, and New York do not allow surcharging, or in the case of New York, have rules that are challenging enough to effectively ban surcharging.
- California has passed a statute prohibiting surcharge, but this law was found to be unconstitutional by the Ninth Circuit. Separately, the CA AG’s office has issued guidance related to California’s “drip pricing” law which sets out that the law only applies to “mandatory” or “required” fees. Since a credit card surcharge is dependent on the form of payment used, a cardholder can avoid paying a surcharge by choosing a different method of payment.
- Colorado allows surcharging as of July 2, 2022, either (i) 2% of the transaction price, or (ii) the actual costs the business pays for processing. Specific language is required on your website; see detailed explanation here.
Additionally, the ABA Model Rules of Professional Conduct do not explicitly prohibit surcharging, but they require law firms to avoid unreasonable fees and ensure full transparency with clients.
Key Considerations for Law Firms Implementing a Surcharge
Compliance with Card Brand Rules
Visa, Mastercard, and American Express impose their own rules for surcharging, which law firms must follow. These include:
- Notifying the card network and payment processor at least 30 days in advance before implementing a surcharge. Legal-specific merchant accounts, like PayQ, will handle this for you.
- Capping surcharges at 3% or the actual processing fee, whichever is lower.
- Clearly disclosing the surcharge before the transaction is completed.
- Card rules and Federal law prevent surcharging on debit cards (even if run as a credit card).
How we make this easy with PayQ:
- Our flat-rate 2.95% processing charge (with no other per transaction fees), including for American Express, is less than the surcharge limit.
- The surcharge is reflected as a separate line item when your client pays, and the amount is the actual cost of the credit card processing.
- Because the goal is to pass the processing fee on to the client, we turn off accepting debit cards when using surcharging.
Trust Accounting Considerations
Surcharging can create complications for law firms handling trust accounts (IOLTA). The firm may unintentionally commingle funds if the surcharge is deposited in the trust account.
PayQ avoids this issue:
- Only the net amount without the surcharge is deposited into your trust account or operating account.
- Your client pays the surcharge directly and it never goes through your accounts.
- Monthly statements detail the surcharges.
Client Experience and Business Impact
While surcharging may reduce operational costs, it can also impact client relationships. Clients may view surcharges negatively, leading to dissatisfaction or payment delays. Instead of applying a surcharge, some firms opt to:
- Adjust billing rates to factor in processing fees.
- Encourage lower-cost eCheck/ACH payments.
Leveraging eCheck/ACH Payments
eChecks are the best of both worlds: quick, efficient online payments without the high processing fees. Or, at least it should be that way.
The traditional legal merchant account, LawPay/ClientPay, charge a 1% processing fee. They previously had a $10 per transaction cap, but that has recently been removed. Now a $10,000 eCheck payment costs 10X more: $100 instead of $10.
With PayQ, eChecks are only $1 per transaction with no percentage fee.
See the 2025 Law Firm Merchant Account Comparison for a more details.
Should Your Firm Implement a Surcharge?
Deciding whether to surcharge requires a balance between cost savings and client satisfaction. If your firm operates in a jurisdiction that permits surcharging, and you are transparent in your billing practices, it could be an effective strategy to recover processing costs. However, firms should weigh the potential drawbacks, including client pushback and the loss of benefits in reducing A/R turnover and increasing collected realization rates.
How We Can Help
PayQ is the law firm merchant account that makes surcharging easy and is part of our Legal Invoices-to-Cash suite of solutions.