Credit Card Processing Fees: To Charge or Not to Charge

Many CPA firms accept electronic payments. It is 2023, after all. If your firm has been accepting credit cards, you may wonder whether to charge the merchant or processing fees back to the client.

There are two ways to tackle this:

1. Build the processing fees into your pricing by adding your processing rate, usually around 3%, to your existing prices.
   • Pros: The client gets the convenience, and points, of paying by credit card, and they don’t feel they have to pay “extra charges”. If the client pays by check, ACH or a suitcase full of cash (not recommended), the 3% is yours to keep.
   • Cons: Many firms struggle with price increases to begin with, so adding an “extra 3%” might feel like too much, or might be counter-balanced by lowering what should have been a healthy increase because of the additional charge.
2. Charge the processing fee to your client directly. This means they will see a 3% surcharge on top of the regular invoice amount.
   • Pros: You’ll recover 100% of the merchant fees. This could add up to significant savings for the firm if it had been paying the fees itself.
   • Cons: Clients might not love the change, though based on some anecdotes below this doesn’t seem to be a big challenge. Depending on your client base, add-on fees may not align with your brand. You may prefer to “eat the cost” (aka build it into your price) and give your clients the luxury of charging their credit card without paying extra.

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A recent exchange from one of our roundtable groups included the following:

Question: We do a substantial amount of subscription billing. Do firms mandate ACH vs. credit card? We accept credit cards, but our merchant fees are significant ($200,000 annually). Wondering if anyone stopped accepting credit cards, and what the response was from clients?

Response 1: “We sent a letter to those who were set up with recurring charges letting them know that, in order to keep from raising our pricing, we were implementing a credit card surcharge. We let them know they could pay by check or by ACH if they wanted to avoid fees, including the ACH form, of course. I think 80% switched to ACH and the remaining 20% are paying the fee.

“We send our project invoicing via email with 3 options to pay: 1) via ACH with an e-sign ACH form link; 2) via check; or 3) via credit card with the disclaimer: We impose a surcharge of 3% on credit card transactions.”

Response 2: “We have them pay a credit card fee. It saved us over $100,000 of expenses. Huge savings and no one cared. They can pay via ACH, debit card, check, or cash with no fee…. Credit card is the only option with a fee. It is their choice.

“I don’t think you need to give them a reason for no longer accepting credit cards or charging the fee back to them… everyone is doing this. This change was a non-issue for us; no clients cared.”

What is your accounting firm doing on processing fees or payment methods? Comment below!