Financially Legal

Two Ways Law Firms Can Reduce the Cost of Accepting Credit Cards

Posted by Emery Wager on May 15, 2020
Emery Wager

Credit cards are a great way to get paid more quickly. The Clio trends report shows that firms who accept credit cards get paid 39% faster than those that don't. 

But credit cards are expensive. For invoice or trust payments where the client enters the card, rather than swiping or dipping, the cost generally hovers around 3%. Furthermore, credit cards are not the only way to provide a high-quality online payment experience.  

Shopping around for better rates can save you a few tenths of a percent, but here are two changes you can make to drastically reduce card fees while still getting the benefit of speedy payments. 

1. Accept ACH

Otherwise known as online bank transfers or e-checks, ACH allows your clients to pay by entering their bank account and routing number instead of their credit card. Any payments made by ACH are generally 80-90% less expensive than credit cards. On a single $10,000 transaction, a firm can save between $200 and $300. 

If your clients, don't want to pull out their bank account and routing number every time they receive an invoice, consider using software to securely keep the bank account on file. This way, the client need only send an email approving payment on the invoice. You can then just charge the bank account on file. No need for the client to re-enter their payment information every time they want to pay.

The difference in processing costs between credit cards and ACH is the reason mobile apps and other e-commerce sites sometimes provide incentives to customers for keeping bank accounts on file as opposed to credit cards.

2. Pass the processing fees to clients

Most states allow businesses to add a fee onto a transaction to cover the cost of processing. In addition, the rules of professional conduct in most states either explicitly allow, or are silent, on this practice. 

Concern over client reactions to this added cost is justified, and we recommend offering alternative payment methods that are not subject to the higher amount, such as debit cards or ACH . This provides clients with a simple way to avoid the cost, while still reducing your firm's expenses.  

There are rules to navigate when charging clients for credit card fees, but with the right systems and proper fee agreements in place, this practice can take a big bite out of your firm's processing fees.  

For more details on this practice and to see the rules in your state, view this guide.

Topics: Firm Financials, Credit Card Fees

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Financially Legal is a twice-monthly podcast on the finance and economics of entrepreneurial law firms and lawyering. Host, Dan Lear, talks with law firm leaders, academics, business professionals (both in and outside of law) and thought leaders to provide compelling and provocative content at the intersection of finance, economics, and law.

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