Reduce Credit Card Costs Associated with Corporate Clients

Feb, 2021   ·   4 min read

Law firms are rapidly moving towards accepting electronic payments and in particular credit/debit cards and ACH payments. Accepting electronic payments reduces operational / accounting activities, reduces collections, and improves a law firms cash flow. In addition, many clients expect the convenience of paying using an electronic means. In this post we will focus on the cost of accepting credit cards particularly for corporate clients paying with corporate or purchasing credit cards.

Credit card processing does have a significant cost associated with it for law firms or anyone that accepts credit cards. The cost is made up of several different components. The one number that reflects the aggregated cost is the effective rate. This is the actual percentage paid in total for accepting cards. For example, a processor might charge $20 per month, 2.5% and $0.25 per transaction. If your firm processes 10 transactions for $1,000 each your expense will be $272.50 ($250+$20+$2.50) or 2.73%.

This percentage rate is made up of fees charged by the three main actors in the payment process: The card holders (client) issuing bank, the card brands (Visa, Mastercard, American Express, etc.) and merchant processor.

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The following is a rough breakdown of the fees that each of the payment organizations receive based on the 2.73% effective rate example described above:

  • Approximately 2% goes to card's issuing bank (Wells Fargo, Capital One, B of A, etc.) this is called the interchange rate.
  • 0.10% goes to the card brand on the front of the card being processed, Visa, Mastercard, etc.
  • The remaining 0.63% goes to the merchant processor and is the only negotiable rate, with one important caveat.

To drive card usage for business-to-business transactions, processors may incentivize organizations like law firms charging corporate and business clients with discounts up to 1% on interchange rates given certain data fields are provided called Level 2 and Level 3 data.

Managing the business side of a law firm is a challenge and every dollar counts. If your firm provides services to business and corporate clients and they pay you via credit card, ask your legal payment processor about discounts on Level 2/3 business to business transactions.

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