Credit card surcharging offers Louisiana MSPs an effective tool to manage rising payment processing costs by sharing those fees with clients.
As of December 2024, Louisiana permits credit card surcharges under guidelines that align with federal laws and card network policies. For MSPs, this provides an opportunity to recover a considerable share of their processing costs.
However, this comes with the responsibility to ensure compliance with state-specific rules, federal requirements, and the surcharging caps set by card networks such as Visa, Mastercard, and other card brands.
This guide breaks down Louisiana’s surcharging laws and provides valuable steps for MSPs to introduce surcharges without disrupting client relationships.
It will also explore how payment automation tools can refine the process, offering automation and transparency that support both compliance and operational efficiency.
Disclaimer: This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for, legal advice. Perform thorough due diligence and consult with a qualified legal professional to address specific questions related to your MSP.
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What is Credit Card Surcharging for MSPs in Louisiana?
Credit card surcharging empowers MSPs (Managed Services Providers) in Louisiana to offset credit card processing costs by passing a portion or all of these fees to their clients.
This practice primarily benefits MSPs that handle substantial transaction volumes or recurring payments, where processing costs can seriously affect profit margins.
Credit card processing fees, including interchange fees, assessment fees, and processor markups, typically range from 2% to 4% per transaction.
These fees accumulate rapidly, straining cash flow and limiting resources for reinvestment or growth.
For example, a Louisiana MSP processing $120,000 in monthly credit card transactions at an average processing fee of 3% incurs $3,600 in monthly costs.
This amounts to $43,200 in processing fees over a year—funds that could otherwise support hiring, technology upgrades, or client acquisition initiatives.
With a 3% surcharge (for example), the MSP can transfer this cost to clients and potentially save $43,200 annually. This reclaimed capital can strengthen the MSP’s financial health and provide resources for scaling operations.
Some MSPs may prefer a more proportional strategy to maintain client satisfaction.
For example, by applying a 2% surcharge instead of 3%, clients would cover $2,400 monthly while the MSP absorbs the remaining $1,200.
This strategy still recovers $28,800 annually, alleviating financial pressure without entirely relying on clients to cover these costs.
Regardless of your approach, transparency and compliance are vital to successful surcharging.
Transparency is crucial for any business implementing surcharges.
Fees should be clearly explained to clients, visibly outlined on invoices, and aligned with all applicable state laws, federal regulations, and card network rules.
By thoughtfully integrating surcharges, businesses can offset processing expenses while bolstering business growth and financial resilience.
The following sections will explore the steps and considerations for implementing this strategy in compliance with Louisiana laws.
Understanding Credit Card Surcharging Laws in Louisiana
Credit card surcharging is permitted in Louisiana (as of December 2024). This common payment practice allows businesses to offset processing fees associated with credit card transactions. However, these practices must align with strict regulations.
Surcharges are permitted for credit card payments but not for debit or prepaid cards, regardless of how the transaction is processed. This regulation is rooted in federal legislation such as the Durbin Amendment of the Dodd-Frank Act.
Transparency is a cornerstone of surcharging compliance in Louisiana.
An MSP must inform clients of surcharges before processing their payments. Open communication during client onboarding and beyond avoids misunderstandings and ensures transparency and trust.
Properly itemizing surcharges on invoices or receipts meets legal requirements and reinforces professionalism.
Implementing surcharging requires thorough incorporation into billing systems and effective communication with clients.
Clarifying the importance of these fees can create positive relationships, and accurate invoicing provides clients with complete transparency concerning their payments.
Under Louisiana state law, merchants must also apply surcharges to all credit cards they accept if they implement this practice—they cannot pick and choose.
For example, suppose an MSP applies a surcharge to Visa credit card transactions but not to Mastercard or American Express. In that case, they will violate Louisiana's surcharge rules and regulations.
The law requires a consistent approach. If surcharges are adopted, they must be applied consistently across all credit card transactions, independent of the card issuer or brand.
This ensures fairness and keeps businesses from favoring one payment network over another.
Note: Seek legal advice from an experienced legal professional for specific guidance on your business when navigating Louisiana surcharge laws.
Implementing Credit Card Surcharging for Louisiana MSPs
Adding surcharges to credit card transactions not only covers processing expenses but also allows Louisiana MSPs to improve invoicing procedures and align expenditures with revenue.
To be effective, surcharging should be treated as a systematic company strategy rather than a simple pricing adjustment.
MSPs work hard to build client trust; however, hidden charges can quickly undermine that trust.
A well-communicated surcharge policy reduces confusion and frames the fee as an essential aspect of the business rather than an unnecessary cost.
With clear invoicing and upfront discussions, MSPs can foster understanding and reduce potential payment friction.
Consider how surcharges impact client loyalty, too.
Research from PYMNTS shows that added fees influence how clients perceive a business, and some may explore other options if surcharging is utilized.
As such, MSPs must balance cost recovery with client satisfaction, ensuring any changes to billing are thoughtful and fair.
Using surcharges to cut costs and boost client engagement, MSPs can create a model that supports profitability without compromising relationships.
The following guide provides a roadmap to achieve this balance effectively.
Step 1: Establish a Clear Surcharge Policy and Structure
A clear and thorough surcharge policy is the cornerstone for effective implementation. This policy should outline how surcharges are determined, the percentage or flat fee used, and how they are added to invoices.
Including this information in client contracts or service agreements promotes transparency and reduces misunderstandings.
Louisiana MSPs can structure surcharges in various ways, including fixed percentages, flat fees, and tiered prices based on transaction quantities or client classifications. Your business model and target audience determine the most suitable approach.
Examples of Surcharge Structures:
a. Fixed Percentage Surcharge:
A Louisiana MSP applies a 3% surcharge to all credit card payments.
Example: A $7,500 invoice would include a $225 surcharge, totaling $7,725.
b. Tiered Surcharge System:
With this structure, the rates are contingent upon the transaction amount.
For instance, transactions exceeding $5,000 incur a 3% fee, while those below $5,000 incur a 2% fee.
Example: A $4,500 invoice would have a $90 surcharge (2%), while a $6,000 invoice would incur a $180 surcharge (3%).
MSPs can preserve profitability and satisfy clients by selecting an appropriate surcharge structure.
Step 2: Notify Credit Card Institutions and Clients
Louisiana MSPs must notify their clients and the credit card brands they accept, including Visa and MasterCard, before implementing surcharging.
Card networks typically require 30 days' advance notice before implementing surcharges.
Visa, for instance, has the following rule:
“U.S. merchants must first notify Visa and their acquirer of their intent to surcharge at least 30 days before implementing surcharging. Merchants can submit a notification form to Visa.”
Communicating with clients about surcharges is equally meaningful.
Explain to your clients how surcharges work and clarify how they offset processing fees rather than serve as an additional profit-making fee.
Offering this clarity from the outset ensures clients understand the necessity of the fees, making them less likely to view them negatively.
Failing to provide notice can result in payment disputes.
For example, if a client expects to pay $8,500 but notices an unexpected $255 (3% surcharge) on their invoice, they might contest the charge with their card issuer.
Such disputes can lead to chargebacks, which cost businesses the transaction amount and additional fees, averaging $190 per dispute.
With proactive communication on surcharging policies and practices and carefully disclosing fees on invoices, MSPs can:
- Avoid misunderstandings
- Preserve client trust
- Reduce costly disputes
Clear and upfront communication creates smoother billing interactions and strengthens long-term relationships.
With proactive communication on surcharging policies and practices and carefully disclosing fees on invoices, MSPs can:
- Avoid misunderstandings
- Preserve client trust
- Reduce costly disputes
Clear and upfront communication creates smoother billing interactions and strengthens long-term relationships.
Step 3: Update Invoicing & Billing Systems
Introducing surcharges requires adjustments to your invoicing and billing processes.
Louisiana MSPs should ensure surcharges are itemized as separate line items on invoices, making it easy for clients to see the fee amount and its purpose.
For example, an invoice for $10,000 in MSP services should include a clearly labeled surcharge line, such as:
- Subtotal: $10,000
- Credit Card Surcharge (3%): $300
- Total Due: $10,300
This level of detail promotes financial clarity, reducing the likelihood of disputes or confusion.
Transparent disclosure ensures clients are better equipped to understand the charges, minimizing frustration and enhancing trust.
FlexPoint’s automated payment and billing systems make this level of transparency easy to accomplish. The platform calculates and applies surcharges accurately, assuring compliance with state and federal laws while streamlining invoicing.
Automation eliminates manual payment errors and makes the surcharging process straightforward and professional.
MSP-specific payment automation tools like FlexPoint help MSPs implement surcharges while maintaining a client-friendly approach.
Step 4: Monitor and Review Compliance
MSPs must continually monitor compliance if they intend to use credit card surcharging. Routine reviews of surcharging practices facilitate alignment with state and federal laws and credit card network guidelines.
For instance, Visa caps surcharges at 3%, while Mastercard allows up to 4%. However, these rates cannot exceed the actual credit card processing costs incurred by the business.
Mastercard provides this example:
“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%.
Like card networks, Louisiana state law also mandates that a:
“Business that adds a surcharge onto a purchase when a consumer uses a credit or debit card shall not charge a surcharge amount that is greater than the amount the business pays to process the transaction.”
MSPs must calculate surcharges accurately to avoid exceeding permissible limits. Exceeding the allowed rate could lead to regulatory issues or disputes with clients.
Regular audits of payment systems and client feedback collection can help identify and resolve potential issues early.
Staying informed about updates to credit card network policies or state laws is equally critical.
For example, when Visa adjusted its surcharge cap to 3% in 2023, many businesses needed to modify their billing systems to remain compliant.
Proactively managing these developments enables MSPs to retain compliance while also protecting client relationships.
Louisiana's managed service providers implementing credit card surcharging must perform ongoing compliance monitoring. With a careful eye on state, federal, and card network regulations, they can ensure ongoing compliance – even when rules change.
The Role of FlexPoint in Simplifying Credit Card Surcharging for Louisiana MSPs
For MSPs aiming to cut costs while maintaining compliance, FlexPoint offers tailored solutions that simplify surcharging and improve financial efficiency.
Payment Processing Options
FlexPoint provides MSPs with two customizable payment processing options, each addressing specific operational goals:
- Interchange+ Plan
- Customer Surcharge Plan
Let’s review each of these plans in detail.
a. Interchange+ Plan
The Interchange+ plan provides MSPs with a transparent pricing structure linked to the interchange rate of each card type. This approach allows MSPs to choose how they handle processing fees.
MSPs can decide whether to accept debit card payments. If they do, they will pay the applicable fees under the Interchange+ model, as there is no option to pass these fees on to clients.
For credit card payments, MSPs have more flexibility.
They can absorb all the fees under the Interchange+ model or pass a portion to clients through surcharging, subject to state laws.
The Interchange+ option can result in cost savings for MSPs depending on the type of card used, particularly since premium credit cards, like those from American Express, often have higher interchange fees of up to 3.5%.
This flexibility makes Interchange+ a practical choice for MSPs aiming to strengthen client satisfaction by reducing client-facing fees.
Ultimately, MSPs understand their client base best to select the most mutually beneficial approach for their business and clients.
b. Customer Surcharge Plan
The Customer Surcharge plan shifts the burden of processing fees to clients by applying a flat surcharge to all credit card payments.
For example, a 3% surcharge on a $10,000 invoice yields a $300 fee, effectively covering processing costs without affecting the MSP’s bottom line.
FlexPoint also supports hybrid strategies, allowing Louisiana MSPs to share costs with clients selectively.
For instance, the MSP might split fees for certain clients, decreasing the surcharge percentage to balance financial goals with client satisfaction.
How FlexPoint Enhances Compliance and Transparency
FlexPoint takes the complexity out of surcharging by calculating fees in compliance with Louisiana’s regulations, federal guidelines, and card network policies.
This includes adhering to the federal 4% surcharge cap and network-specific limits, such as Visa’s 3% ceiling.
An invoice processed through FlexPoint might look like this:
Payment Terms:
Payment is due within 45 days of the invoice date. The surcharge complies with federal regulations (under the 4% limit), Louisiana state laws, and card network guidelines.
Notes:
Thank you for your business! If you have any questions regarding this invoice, please contact us at [Your Contact Information].
FlexPoint automatically itemizes surcharges, providing accurate and straightforward invoices for clients. This level of detail minimizes the risk of disputes, enhances client confidence, and aligns with compliance requirements.
FlexPoint’s Integration with MSP Tools for Seamless Billing
FlexPoint effortlessly integrates with several popular platforms that most MSPs rely on, including QuickBooks Desktop and QuickBooks Online, Xero, ConnectWise, and SuperOps.
Louisiana MSPs can count on FlexPoint to automatically handle invoicing, billing, and reconciliation, freeing time and minimizing manual administrative work.
For instance, syncing FlexPoint with QuickBooks Online automatically updates financial data, such as surcharge details, eliminating manual entry and reducing errors.
These integrations provide MSPs with accurate, real-time financial data ready for reporting and analysis.
Offering Flexibility in Surcharging
FlexPoint makes it possible for managed service providers to modify surcharging practices per their business requirements and client relationships.
This adaptability enables MSPs to waive surcharges for their most loyal, long-standing clients while using them for new clients or those who purchase fewer services.
FlexPoint automates compliance with card network regulations to ensure your surcharging practices remain within permissible limits and comply with state and federal regulations.
For instance, FlexPoint ensures the fee remains compliant by calculating no more than a 3% surcharge to match the network's limit when a client pays with Visa.
This precision enables MSPs to maintain a seamless and transparent payment process while avoiding penalties.
FlexPoint also improves transparency by providing clients with complete visibility into their charges through branded payment portals. Clients can review surcharges before concluding a payment, which mitigates disputes and misunderstandings.
Additionally, these portals allow clients to make seamless updates to their payment methods.
For example, a client who frequently utilizes a high-reward credit card with a 3.5% surcharge may transition to a standard debit card to avoid additional fees.
Not having to contact you or your accounting team to do this saves time for both the client and you but also enhances the overall payment experience by giving clients control over their payment options.
FlexPoint simplifies surcharging for MSPs by integrating automation, compliance, and client-centric features.
By eliminating the intricacies of manual calculations and compliance monitoring, businesses can concentrate on serving clients and expanding operations.
This customized approach allows MSPs to confidently manage surcharges, enhancing operational efficiency and fortifying client relationships.
Conclusion: Streamlining Payments with Effective Surcharging Strategies
Payment processing costs are significant for MSPs. In Louisiana, credit card surcharging provides a pathway to cutting these costs by sharing them with clients.
To do so, MSPs must carefully follow several federal and state regulations and card brand rules. This ensures the process remains smooth and dispute-free.
To maintain compliance, invoices must itemize surcharge amounts, and clients should be informed of these charges upfront.
Missteps, such as exceeding allowable surcharge limits or failing to disclose fees, can result in penalties, disputes, or even restrictions from card networks.
FlexPoint simplifies the complexities of surcharging, providing MSPs with a tailored payment automation platform.
From calculating fees to aligning with state and federal regulations, FlexPoint ensures surcharges are applied seamlessly and accurately, freeing MSPs from administrative headaches.
Enhance your MSP’s bottom line and compliance with automated credit card surcharging solutions from FlexPoint. Stay within Louisiana’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 Louisiana for MSPs
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