Credit card surcharging allows managed service providers (MSPs) in Delaware to recover the costs associated with credit card transactions.
By passing on some or all of these processing fees to clients, MSPs can better manage payment-related expenses and protect their profit margins without absorbing the entire cost themselves.
Delaware MSPs must follow federal laws, state regulations, and card network guidelines to implement surcharging. This includes adhering to surcharge caps and clearly disclosing surcharge details to clients to avoid misunderstandings or payment disputes.
This guide explores Delaware’s credit card surcharging rules, provides implementation tips, and highlights how payment automation tools can simplify compliance and streamline the process.
Disclaimer: This content is for informational purposes only and does not constitute legal advice. MSPs should consult with a qualified attorney to address any legal or operational concerns.
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What is Credit Card Surcharging for MSPs in Delaware?
Credit card processing fees include interchange fees, network assessments, and payment processor markups.
These fees typically range from 2% to 4% per transaction, totaling just cents on the dollar. However, when an MSP is solely responsible for these costs, they add up quickly.
This is especially true for MSPs that manage high transaction volumes or recurring payments. As these fees accumulate over time, they diminish available resources for business growth.
For example, a Delaware-based MSP processing $90,000 in monthly credit card payments with an average fee of 3% incurs $2,700 in monthly fees—totaling $32,400 annually.
By implementing a 3% surcharge, the MSP passes this cost on to clients, effectively saving $32,400 each year. These funds can be reinvested in hiring, upgrading systems, or expanding services.
Alternatively, some MSPs prefer a shared-cost approach.
If the MSP applies a 1.5% surcharge, clients will cover $1,350 monthly while the MSP absorbs the remaining $1,350.
This allows the MSP to recover $16,200 annually while maintaining a balanced strategy that promotes client satisfaction.
Transparency is critical in any surcharging model.
Delaware MSPs must comply with federal regulations, state laws, and guidelines from payment networks like Visa, Mastercard, Discover, and American Express.
Transparent communication with clients about surcharging practices is necessary to avoid misunderstandings and bolster trust.
The following sections outline Delaware's surcharging laws, implementation strategies, and best practices to help MSPs stay compliant and build lasting client relationships.
Understanding Credit Card Surcharging Laws in Delaware
Delaware permits credit card surcharging (as of January 2025), which provides MSPs with a solution for managing processing fees. However, compliance with strict legal and regulatory standards is required.
Federal laws, such as the Durbin Amendment of the Dodd-Frank Act, prohibit applying surcharges to debit or prepaid cards, even when processed as credit.
Delaware MSPs must respect this limitation to remain compliant.
House Bill 488 was introduced in 2022 to prohibit credit card surcharging in Delaware, but it was not passed.
The Act was intended to amend Title 6 of the Delaware Code regarding credit cards.
Had the Act passed, it would have prohibited sellers from imposing a surcharge on cardholders who use a credit card in place of payment by cash, check, or other payment methods.
With the Bill defeated, surcharging remains a permissible practice in Delaware.
While the state of Delaware does not impose any additional surcharging regulations beyond federal requirements, merchants must still adhere to federal laws and card brand guidelines. For example, the federal surcharge cap is 4%, meaning merchants cannot charge more than 4% of the transaction amount, even if their processing fees are higher.
Card brands such as Visa, Mastercard, Discover, and American Express impose their own rules.
These include ensuring surcharges do not exceed the merchant’s actual processing costs and requiring clients to be clearly disclosed about surcharges before completing the transaction.
Visa also imposes a 3% surcharging cap, and this lower limit takes precedence over the federal 4% cap in transactions involving Visa cards.
Transparency is also fundamental for supporting client trust and meeting legal requirements.
Surcharges should be communicated to clients before payment processing takes place, and fees should be itemized on invoices or receipts to clarify.
To implement surcharging effectively, MSPs must integrate these fees into billing processes and educate clients about their necessity. Doing so promotes trust and professionalism.
Note: For accurate legal advice, consult a qualified attorney to ensure full compliance with Delaware’s surcharging laws.
Implementing Credit Card Surcharging for Delaware MSPs
A precise strategy that prioritizes compliance, transparency, and operational efficiency is vital for effectively executing credit card surcharging.
This approach allows MSPs in Delaware to apply surcharges fairly, within legal boundaries, and with minimal impact on client relationships.
Below is a step-by-step guide for introducing a surcharging policy tailored to Delaware MSPs.
Throughout this guide, you’ll also find best practices to ensure compliance and maintain trust while imposing surcharges.
Step 1: Establish a Clear Surcharge Policy and Structure
Delaware MSPs must first establish a well-defined surcharge policy. This policy should outline the surcharge amount (within allowable caps), when it is applied, and which transactions will incur the fee.
MSPs must also decide on a structure for implementing surcharges, and there are a few different approaches to take:
- Fixed Percentage Surcharge
- Tiered Surcharge System
- Flat Fee Surcharge
a. Fixed Percentage Surcharge:
A consistent percentage is added to all credit card payments.
Example: A $6,000 invoice with a 3% surcharge results in a $180 fee, bringing the total to $6,180.
b. Tiered Surcharge System:
Rates vary based on transaction size.
Example: 2% for transactions under $3,000 and 3% for transactions over $3,000. A $2,500 invoice would have a $50 surcharge, while a $5,000 invoice would have a $150 surcharge.
c. Flat Fee Surcharge:
The MSP applies a fixed fee to each credit card payment, regardless of the invoice amount.
Example: An MSP applies a flat $40 surcharge to all credit card payments. For a $3,000 invoice, the total payment becomes $3,040.
If the invoice amount is lower, adjustments may be required.
For instance, on a $500 invoice, where the processing cost is 3%, the MSP could not charge more than $15 in surcharges to stay within compliance.
This structure works well for MSPs with consistent invoice sizes but requires monitoring and flexibility to remain compliant for smaller transactions.
Step 2: Notify Credit Card Institutions and Clients
Delaware MSPs must notify their payment processors or acquirers, such as Visa and Mastercard, at least 30 days before implementing surcharges. This notification ensures compliance with card network guidelines.
Clients must also be informed well in advance. Service agreements should clearly explain the surcharge amount, its purpose (to offset processing costs), and any conditions under which it might vary.
When notifying clients, MSPs should make it abundantly clear that credit card surcharging is not a profit-generating but a cost-recovery measure. Otherwise, they risk eroding client trust and facing potential disputes over perceived unfair charges.
To maintain transparency, invoices should prominently display the surcharge amount, percentage, and total cost.
For instance, a $10,000 invoice with a 2.5% surcharge would show an additional $250 fee, bringing the total to $10,250. Communicating these charges prevents misunderstandings that could lead to payment disputes.
Failing to disclose surcharges can result in chargebacks, which are costly for MSPs.
For example, if a client disputes a $200 surcharge they were not informed about, it could lead to chargeback fees. According to Swipesum, the average chargeback costs businesses $190 per dispute.
Step 3: Update Invoicing and Payment Systems
When applying surcharges for the first time, update your invoicing procedures to reflect these costs appropriately. Again, surcharges must be listed separately on each invoice.
This helps clients understand the charges and reduces the likelihood of disputes or misunderstandings.
FlexPoint's MSP-specific automated billing and payment solutions can accurately calculate and include surcharges on invoices. This simplifies the process and gives MSPs peace of mind that surcharges are displayed prominently and calculated correctly.
Step 4: Continuously Monitor Compliance
MSPs must regularly review their surcharging practices to ensure ongoing compliance with state, federal, and card network laws and regulations.
This involves assuring that surcharge rates align with caps and addressing any legislation or payment network policy changes.
For example, in 2023, Visa’s surcharge cap was lowered from 4% to 3%. This change required merchants who had previously charged higher rates to adjust their practices or risk penalties and other consequences of non-compliance.
Mastercard’s cap of 4% only applies when processing fees exceed this percentage. Otherwise, merchants can only charge up to their actual merchant discount rate (MDR).
“If a merchant’s merchant discount rate for Mastercard credit cards is 2.50%, the cap on the surcharge that this merchant may charge a consumer is 2.50%, not 4%.
The 4% cap only becomes relevant in the rare instances where a merchant is paying more than 4% for Mastercard acceptance.”
Delaware MSPs that monitor and adjust surcharging policies proactively can avoid penalties, sustain transparency, and amplify client trust while effectively managing processing costs.
The Role of FlexPoint in Simplifying Credit Card Surcharging for Delaware MSPs
For Delaware MSPs seeking to manage costs while upholding compliance, FlexPoint offers tailored payment processing solutions that streamline surcharging and improve financial efficiency.
Payment Processing Options
FlexPoint provides two customizable payment processing plans designed to meet the specific needs of MSPs:
- Interchange+ Plan
- Customer Surcharge Plan
a. Interchange+ Plan
The Interchange+ Plan is designed for Delaware MSPs who manage payment processing costs internally rather than transferring them to clients.
Interchange rates depend on the card type.
With the Interchange+ Plan, costs align with the interchange rates for each card type. This transparent strategy ensures that fees are modified depending on the type of card used in the transaction.
For example, transactions with Discover cards (with lower interchange rates) result in lower processing fees.
Conversely, American Express and high-reward credit cards often have higher interchange rates, which results in higher transaction fees.
This plan is ideal for MSPs who do not want to surcharge their clients while yet receiving the best credit card payment rates.
b. Customer Surcharge Plan
The Customer Surcharge Plan shifts the responsibility of credit card processing fees to clients. Instead of absorbing the costs, MSPs add a fixed percentage to each credit card payment so clients cover the surcharge.
This approach provides transparent pricing and helps MSPs safeguard their cash flow by eliminating out-of-pocket processing costs.
Example: A 3% surcharge on a $12,000 invoice results in a $360 fee for the client, fully covering processing costs without affecting the MSP’s profit margins.
FlexPoint also supports a hybrid approach for MSPs seeking an equitable solution where the MSP and the client split payment processing fees.
This flexibility helps MSPs protect their bottom line while preserving positive client relationships.
How FlexPoint Enhances Compliance and Transparency
FlexPoint simplifies surcharging by automating fee calculations and ensuring compliance with Delaware regulations, federal laws, and card network policies.
This includes adhering to the federal 4% surcharge cap and network-specific limits, such as Visa’s 3% ceiling.
Here’s a sample of how an invoice processed through FlexPoint might look with a 3% surcharge:
Notes:
Thank you for choosing [Your Business Name]! If you have questions, please contact us at [Your Contact Information].
FlexPoint’s Integration with MSP Tools for Seamless Billing
FlexPoint integrates with popular business management tools, helping Delaware MSPs handle invoicing, billing, and reconciliation in one centralized platform.
Integrations include:
- QuickBooks Online AND QuickBooks Desktop
- Xero Accounting
- ConnectWise PSA
- SuperOps
- HaloPSA
- Autotask
These integrations substantially reduce the need for manual administrative work by streamlining workflows, saving time, and improving invoice accuracy.
FlexPoint automatically updates payment statuses, surcharge amounts, and reconciliation details across systems, minimizing errors and guaranteeing consistency.
For example, FlexPoint’s QuickBooks integrationautomatically matches real-time payments and surcharges to invoices. This provides immediate updates on payment status and expedites month-end accounting processes.
Administrative burdens are eased, and MSPs can focus on their clients and core operations.
Features like branded payment portals and real-time reporting further enhance operational visibility. These tools deliver a professional and cohesive experience for clients and provide MSPs with the data needed for precise financial management.
Offering Flexibility in Surcharging
Handling surcharges requires a strategic approach for Delaware MSPs.
FlexPoint allows Delaware MSPs to adjust surcharging practices to suit their unique business needs and client relationships.
This flexibility lets MSPs waive surcharges for long-standing, loyal clients while applying them to newer or infrequent clients.
FlexPoint also automates surcharge calculations to ensure compliance with card network regulations and state laws.
For example, FlexPoint applies no more than a 3% surcharge when a client uses Visa, aligning with the network's limit. This precision decreases the risk of penalties and ensures your payment practices meet federal and state guidelines.
With branded payment portals, FlexPoint improves transparency by allowing clients to review their surcharges before completing a transaction. This upfront visibility reduces disputes and fosters trust.
These portals also give clients control over their payment methods.
For instance, a client frequently using a premium credit card with a 3.5% surcharge might switch to a debit card to avoid additional fees.
Clients can make these changes independently, saving time for both parties and enhancing the overall payment experience.
By automating compliance, integrating surcharge calculations, and offering client-focused features, FlexPoint eliminates the complexities of manual processes and bolsters strong client relationships.
Conclusion: Streamlining Payments with Effective Surcharging Strategies
Payment processing fees can significantly impact Delaware MSPs' profitability. Credit card surcharging, which involves sharing these costs with clients, offers a practical way to reduce these costs.
However, implementing surcharges requires strict adherence to federal regulations, Delaware state guidelines, and card network rules to ensure compliance and avoid disputes.
To remain compliant, MSPs must itemize surcharge amounts on invoices and inform clients of these charges before processing payments.
Errors—such as exceeding surcharge caps or failing to disclose fees—can lead to penalties, client disputes, or restrictions imposed by card networks.
FlexPoint simplifies surcharging by offering a comprehensive payment automation platform that is purpose-built for MSPs. The system handles everything from precise fee calculations to legal and compliance requirements.
With FlexPoint, MSPs can implement surcharges seamlessly and focus on core business operations without worrying about administrative complexities.
Enhance your MSP’s bottom line and compliance with automated credit card surcharging solutions from FlexPoint.
Stay within Delaware’s regulations and simplify your MSP payment processes using FlexPoint today.
Schedule a demo to see how FlexPoint can transform your financial operations and maximize profitability.
Additional FAQs: Credit Card Surcharging in Delaware for MSPs
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