Credit card surcharging allows Maryland MSPs to offset the rising credit card processing costs by passing these costs on to clients. This approach allows MSPs to maintain their margins without absorbing the full weight of processing fees.

Maryland and most states in the U.S. permit credit card surcharging. However, if they do so, MSPs must comply with all applicable federal, state, and card brand regulations. 

Understanding the rules around credit card surcharging is vital for Maryland MSPs looking to implement it correctly. 

This guide explains Maryland’s surcharging laws, outlines practical steps, and illustrates how an automated payment platform like FlexPoint can simplify surcharge management.

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 Maryland?

Credit card surcharging allows Maryland MSPs to recover credit card processing costs by shifting these fees to their clients. This approach helps MSPs maintain stable profit margins while offering the convenience of credit card payments. 

Surcharging can be especially useful for MSPs with recurring payments or large transaction volumes, where even small fees can add up quickly.

Credit card processing fees typically fall between 2% and 4% per transaction. These charges include interchange fees, assessment fees, and processor markups.

While each fee may seem insignificant on its own, the cumulative impact can significantly reduce an MSP’s profitability.

Consider a Maryland-based MSP that processes $75,000 in monthly credit card payments. The average processing fee is 3%, resulting in $2,250 in monthly fees and $27,000 annually.

For many MSPs, this is enough to significantly affect cash flow, limit their ability to reinvest in the business or delay hiring new staff.

One way to manage these costs is by introducing credit card surcharging. If the MSP adds a 3% surcharge to client payments, clients would cover the $2,250 monthly fees.

This would save the MSP $27,000 over a year, giving them the flexibility to invest in growth initiatives, software upgrades, or employee training.

Not all MSPs pass 100% of the fees to clients. 

Some prefer a shared-cost approach to maintain stronger client relationships.

For example, a Maryland MSP may apply a 1.5% surcharge instead of 3%.

A $75,000 monthly transaction total would shift $1,125 in fees to clients while the MSP absorbs the remaining $1,125.

This approach potentially provides the business $13,500 in cost savings over 12 months, thus generating additional cash flow without fully transferring the fee burden to clients.

Maryland MSPs must consider legal and card network requirements when implementing a surcharge. Maryland permits credit card surcharging, but Visa, Mastercard, and other card networks set specific guidelines. 

Businesses must explain these charges to clients before they make payments. Most MSPs disclose surcharge details on invoices, payment portals, or contracts to ensure transparency.

While surcharging can help recover processing fees, the approach requires thoughtful planning and clear client communication.

MSPs should evaluate: 

• How much of the fee to pass on
• How to notify clients
• How to stay compliant with all relevant state and card network rules

The following sections will provide more insight into how to introduce surcharges successfully.

Understanding Credit Card Surcharging Laws in Maryland

Credit card surcharging is permitted in Maryland as of December 2024. 

While surcharging is widely accepted, it comes with specific rules and guidelines that MSPs must follow to remain compliant.

Federal laws, like the Durbin Amendment under the Dodd-Frank Act, prohibit surcharges on debit and prepaid card transactions. This restriction applies even if the debit card is processed as a “credit” payment. 

Compliance doesn’t end with payment method distinctions. 

Surcharging must be handled transparently through proper communication and transparent invoicing. Businesses that fail to meet these standards risk fines, payment disputes, or damaged client relationships.

Maryland state law (SB 520) adds another layer of regulation. This law requires that surcharge fees not exceed the actual cost of credit card processing. 

If an MSP is charged 2.5% in processing fees, it cannot use surcharging to earn a profit by charging its clients a 3% surcharge. 

Additionally, merchants must apply surcharges uniformly across all accepted credit card brands. Selectively applying surcharges to certain cards is not permitted.

Transparency is also a core requirement for credit card surcharging in Maryland. 

Clients must be made aware of any surcharges before payments are processed. This step is paramount for maintaining trust and compliance and reducing disputes.

Maryland MSPs should clearly communicate surcharges by including notices in service agreements, client portals, or payment processing platforms.

Invoices and payment receipts should also clearly itemize the surcharge amount. Labeling the surcharge on an invoice helps clients understand what they’re paying and builds trust in the billing process.

For example, if a client’s total bill is $1,000 and a 2.5% surcharge applies, the invoice should list the original total, the surcharge amount ($25), and the new total of $1,025.

We recommend consulting with a lawyer or qualified legal professional if you are unsure of your surcharging options in Maryland.

Implementing Credit Card Surcharging for Maryland MSPs

Implementing credit card surcharging doesn’t have to be complicated, but it does require careful attention to compliance. 

Surcharging offers MSPs a way to recover credit card processing fees, but it requires a thoughtful approach. Clear client communication, structured surcharge policies, and proper invoicing are essential to a successful strategy. 

Below is a step-by-step process to help Maryland MSPs introduce surcharges while maintaining client trust and avoiding regulatory issues.

Step 1: Establish a Clear Surcharge Policy and Structure

A clear surcharge policy establishes when and how fees will be applied, how much clients will pay, and where fees will be displayed. 

Maryland's SB 520 requires that surcharges not exceed the actual cost of credit card processing. 

This means that even if the federal surcharge limit or card brand limit is 3 or 4%, and the processing rate is 2.6% (for example), the surcharge must be 2.6% or lower.

MSPs have several ways to structure their surcharges. 

Some might implement a flat fee surcharge, choosing a set dollar amount rather than a percentage. However, this flat rate must still be lower than the processing rate to remain compliant.  

The two other approaches are a fixed percentage, the most common approach, or a tiered surcharge system.

Examples of Surcharge Structures:

a. Fixed Percentage Surcharge:

Applies the same percentage fee to all credit card payments.

Example: A 2.6% fee is applied to all credit card payments. For an $11,250 invoice, the surcharge adds $292.50, for a total of $11,542.50.

b. Tiered Surcharge System:

Different surcharge rates are applied based on the invoice amount.

Example: Payments under $5,000 have a 2% surcharge, while payments over $5,000 have a 3% surcharge.

• A $4,800 invoice would include a $96 fee (2%), totaling $4,896.
• A $6,200 invoice would include a $186 fee (3%), totaling $6,386.

Once the surcharge structure is finalized, the policy should be included in client service agreements and contracts. MSPs should outline how and when fees are applied and ensure every client knows the policy before invoices are issued.

Step 2: Notify Credit Card Institutions and Clients

Card networks like Visa and Mastercard require businesses to submit a formal notice at least 30 days before adding surcharges. 

The notice is typically submitted online through a portal provided by the card network or payment processor. For example, Visa requires U.S. merchants to submit a notification form to Visa and their acquiring bank.

Notifying clients is just as important. Surprises on invoices can damage client trust and increase the risk of chargebacks. Proactive communication lets clients know what to expect and helps prevent misunderstandings.

Example Client Notification:

"Starting on [date], a 2.6% surcharge will be applied to all credit card payments. This fee reflects the processing costs required by credit card providers. Our goal is to provide flexible payment options while maintaining consistent service pricing. The surcharge will be clearly displayed on all invoices moving forward."

Providing advance notice shows professionalism and allows clients to prepare for the change. It may also be helpful to offer clients alternative payment options (like ACH payments or direct bank transfers) that don't incur surcharge fees.

Step 3: Update Invoicing & Billing Systems

Invoices must clearly display surcharges as separate line items. This approach shows clients precisely what they are being charged for, reducing confusion and the risk of payment disputes. 

Clients may file chargebacks without clearly itemizing them, which, according to Swipesum, costs businesses an average of $190 per dispute.

Example Invoice Layout:

• Service Fee: $7,400
• Surcharge (2.6%): $192.40
• Total Due: $7,592.40

Automation tools like FlexPoint simplify the process. FlexPoint's automated billing and payment systems automatically calculate surcharges, apply them to invoices, and ensure they are listed as separate line items. 

For recurring payments, automated tools ensure the correct surcharge is applied every month, even if the client's bill changes.

Step 4: Monitor and Review Compliance

Compliance doesn’t end once surcharges are introduced. Federal laws, Maryland regulations, and card network rules can change, so review your surcharge process regularly.

In addition to Maryland's SB 520, which requires surcharge fees to be no more than the actual processing cost, card brand guidelines must also be considered. 

Since 2023, Visa caps surcharge fees at 3%, while Mastercard allows up to the federal limit of 4%. Maryland law takes precedence in this case, so MSPs must follow the lower rate if their processing fees are less than 3%.

Following the Maryland Comptroller’s Guidelines and consulting with a legal professional ensures MSPs comply with any new developments.

The Role of FlexPoint in Streamlining Credit Card Surcharging

Credit card processing fees can create significant hurdles for Maryland MSPs, especially when handling recurring payments or managing large transaction volumes. 

Processing fees accumulate quickly, reducing cash flow and creating unpredictable expenses for MSPs.

FlexPoint offers a practical solution for managing these fees through automated payment processing, customizable surcharge plans, and integrations with MSP software tools. 

By streamlining payments and simplifying compliance, FlexPoint enables MSPs to manage surcharges efficiently, protect profit margins, and deliver a more transparent client billing experience.

Payment Processing Plans

FlexPoint offers two payment processing models, giving Maryland MSPs control over how they handle processing fees. 

Each plan offers distinct advantages depending on how MSPs manage client relationships and transaction costs.

FlexPoint’s Two Processing Plans for Maryland MSPs:

• Interchange+ Plan
• Customer Surcharge Plan

a. Interchange+ Plan

The Interchange+ Plan offers a cost-plus approach to credit card processing. Instead of paying a flat rate for all transactions, MSPs pay fees based on each card's specific interchange rate. 

Visa, Mastercard, Discover, and American Express have different rates for card types, so this plan adjusts costs accordingly.

Interchange+ is ideal for MSPs that prefer to build processing fees into their pricing or offer clients flat-rate packages with no surprise charges. 

With Interchange+, you will have more predictable fees but cannot pass the other credit card processing fees (assessment fees, markup, etc.)  to clients.

Instead, credit card processing costs will vary depending on the type of card your clients use. Higher-point cards like American Express will typically have higher processing costs than lower-point cards like Discover. 

You will benefit from lower interchange rates if your client uses a cheaper card.

b. Customer Surcharge Plan

The Customer Surcharge Plan shifts the responsibility of credit card fees to the client. 

Instead of absorbing fees, the MSP applies a flat percentage surcharge to client payments. This approach ensures the MSP retains its entire revenue from every transaction.

The Customer Surcharge Plan benefits MSPs who want to stabilize cash flow and reduce unpredictable payment fees.

FlexPoint also offers the option to split processing fees with clients.

For instance, if a $20,000 invoice surcharge is $550, the MSP might cover $275 while the client pays the remaining $275. This hybrid model allows MSPs to balance cost recovery with customer satisfaction.

How FlexPoint Enhances Surcharging Compliance and Transparency

Maryland credit card surcharging compliance requires MSPs to follow state laws, card network rules, and federal guidelines. 

Again, Maryland’s SB 520 law prevents businesses from charging more than the actual cost of processing fees. Additionally, Visa caps surcharges at 3%, while Mastercard allows a maximum of 4%.

FlexPoint invoices are clear and precise, which helps reduce misunderstandings and prevent disagreements.

For example, if a Maryland MSP’s client receives a $15,000 invoice with a 3% fee, the charges will be adequately detailed, offering the client complete transparency.

This client's invoice might appear like this:

FlexPoint’s Integration with MSP Tools for Seamless Billing

FlexPoint integrates with leading business management tools, allowing MSPs to manage payments, invoicing, and reconciliation in one place. 

The platform connects seamlessly with:

• QuickBooks Online AND QuickBooks Desktop
• Xero Accounting
• ConnectWise PSA
• SuperOps PSA
• HaloPSA

These integrations help MSPs save time and improve accuracy. Payments, fees, and surcharges are automatically synced across all systems, reducing manual data entry and minimizing payment errors.

For example, FlexPoint updates payment status, surcharge details, and reconciliation information. Payments and surcharges are automatically matched to invoices, speeding up month-end accounting.

Real-time reporting and branded client payment portals further enhance visibility and accuracy.

Offering Flexibility in Surcharging

Every client is different, and FlexPoint allows MSPs to customize surcharge rules for specific clients. Whether offering reduced fees for loyal customers or setting tiered rates based on invoice size, FlexPoint delivers the flexibility to create personalized surcharge plans.

For example, an MSP might use the following surcharging plans: 

• Custom Rates for Long-Term Clients: Offer long-term clients a reduced surcharge rate (e.g., 2% instead of 3%).
• Split-Fee Models: Split processing fees between the client and the MSP.
• Tiered Fees by Invoice Size: A 2% surcharge will be charged on invoices under $5,000 and 3% on invoices over $5,000.

Suppose a Maryland MSP manages payments for two clients.

Client A is a long-term customer, so they receive a 2% surcharge on their $10,000 invoice, while Client B is a new customer, so they pay the standard 3% surcharge. 

With FlexPoint, these custom rules can be automated and applied to every payment.

Conclusion: Streamlining Payments with Effective Surcharging Strategies

Managing credit card surcharges can be challenging, but Maryland MSPs can protect their margins, maintain compliance, and reduce administrative tasks with the right tools. 

FlexPoint provides the automation, flexibility, and transparency MSPs need to implement surcharges smoothly.

With FlexPoint, Maryland MSPs can focus on growth and client satisfaction instead of being consumed by the complexities of credit card processing fees. 

By simplifying payment processing, automating compliance, and supporting flexible surcharge models, FlexPoint helps MSPs cut costs while maintaining financial control and streamlining operations.

Enhance your MSP’s bottom line and compliance with automated credit card surcharging solutions from FlexPoint. 

Stay within Maryland’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 Maryland for MSPs

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