Missouri MSPs can offset payment processing fees with credit card surcharging, which is not prohibited in the state as of December 2024.
This payment collection technique helps managed service providers maintain healthy profit margins and control operating expenses by passing payment processing costs to clients.
To implement surcharging properly, MSPs must follow the rules set by federal laws, state guidelines, and card network policies, such as those of Visa, Mastercard, and American Express.
Straightforward communication with clients and accurate invoicing are vital for building trust and avoiding disputes.
This guide outlines Missouri’s surcharging regulations, explains how to introduce surcharge policies, and highlights how FlexPoint can facilitate the management of these changes.
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. Conduct 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 Missouri?
Credit card surcharging is a payment strategy for MSPs to recover the fees associated with processing credit card payments. Done correctly, MSPs can employ it to reduce payment-related expenses while preserving financial flexibility.
Credit card processing fees typically range from 2% to 4% per transaction and can accumulate quickly. They include interchange fees, card network fees, and processor markups, which impact an MSP’s profitability.
We’ll use a Missouri MSP that processes $90,000 in credit card payments each month as an example.
With an average processing fee of 2.95%, this MSP pays $2,655 in monthly fees.
In a year, this totals $31,860.
If the MSP implements a 2.95% surcharge, clients cover the fee instead. Then, the MSP keeps an additional $31,860 each year.
This extra cash flow could be redirected toward hiring, software investments, or other business needs.
Some MSPs share the cost with clients instead of charging the full amount.
For instance, if an MSP adds a 1.5% surcharge, clients would pay part of the fee, and the MSP would absorb the rest.
If the same Missouri MSP processes $90,000 in payments with a 1.5% surcharge, clients pay $1,350 of the fees monthly.
The MSP absorbs the other $1,305, which means that over a year, the MSP still saves $16,200 in fees.
No matter which strategy is chosen, clear communication with clients is required.
Informing clients about surcharge policies strengthens trust, prevents payment disputes, and ensures compliance.
Understanding Credit Card Surcharging Laws in Missouri
Missouri allows MSPs to apply surcharges on credit card payments. This practice must comply with state guidelines, federal laws, and credit card network rules (VISA and MasterCard).
Surcharges can only be applied to credit card payments—never debit or prepaid card transactions.
This rule is outlined in the Durbin Amendment of the Dodd-Frank Act, which prohibits surcharges on debit and prepaid card payments, even when processed as credit.
Missouri MSPs must also appropriately notify clients of surcharge policies before charging fees.
As per Missouri House Bill 2383:
“Any lender or merchant imposing a convenience fee as provided for in this section shall provide clear disclosure of such fee prior to imposition. Such notice shall include the dollar amount of such fee, a statement that such fee is nonrefundable if applicable, and a statement that such fee is charged for a specific payment method from a list of available payment options.”
To summarize this law (Missouri House Bill 2383):
- You must provide detailed information about any surcharges or convenience fees in your payment policies.
- Merchants must inform clients about the specific dollar amount of the fee before it is charged.
- If the fee is nonrefundable, you must tell your clients this before they pay.
- You must specify which payment methods are subject to the surcharge or convenience fee while also supplying a list of alternative payment options that do not incur additional charges.
Clarity reduces confusion and gives clients a better understanding of payment terms.
If you have questions about the rules governing surcharging in Missouri, consult a legal professional who can provide personalized guidance.
Implementing Credit Card Surcharging for Missouri MSPs
Once a surcharging policy is in place with ongoing compliance practices, it is a relatively straightforward strategy. However, meticulous planning and communication at the outset are necessary to avoid disputes and compliance issues.
If an MSP starts surcharging without proper planning, it may encounter client backlash, payment disputes, and chargebacks.
Below, we have listed four fundamental steps to ensure a constructive surcharging implementation.
Step 1: Establish a Clear Surcharge Policy and Structure
A surcharge policy defines when, where, and how to apply surcharging fees. The surcharge percentage, calculation process, and how it will appear on client invoices should all be thoroughly documented.
Missouri MSPs can choose from several surcharge structures.
Here are examples of how each structure would work:
1. Percentage Surcharge:
A consistent percentage is applied to every transaction. It must comply with all relevant surcharging limits.
Example: An MSP might use a fixed 3% surcharge.
The surcharge for a $10,000 payment is $300, making the total payment $10,300.
2. Flat Fee Surcharge
In this case, a flat surcharging fee is included on all credit card payments.
However, as state and federal legislation mandates, surcharge fees cannot exceed the actual cost of processing a client's payment.
Because of this, businesses that process invoices with extremely high to extremely low values may find this structure problematic; they will still need to periodically modify surcharge fees.
Example: An MSP charges a flat fee of $40 per credit card payment, so the total payment for a $2,000 invoice is $2,040.
If the MSP sends a $500 invoice, the $40 fee would exceed the actual processing cost and is capped at 3% ($15).
In this case, the surcharge must be reduced to $15 to remain compliant.
3. Tiered Surcharge
The surcharge rate varies depending on the invoice total.
For example, an MSP might charge 2% for payments under $5,000 and 3% for payments above $5,000.
A $4,800 payment surcharge would be $96 (2%).
The surcharge for a $7,500 payment would be $225 (3%).
Step 2: Notify Credit Card Institutions and Clients
Before applying surcharges, MSPs must notify credit card networks like Visa, Mastercard, and American Express. Visa requires a 30-day notice, which can be submitted online.
You will also need to tell clients. If they are aware of your intended surcharging policies ahead of time, this prevents disputes and builds trust. Talk to your clients about surcharge fees during onboarding, contracts, and invoices.
For example, a Missouri MSP issued an invoice for $6,000 with a 3% ($180) surcharge but did not inform the client that the surcharge would be added.
The client was expecting a $6,000 invoice, not a $6,180 invoice.
Thinking there was a mistake, the client contacted their bank to dispute the charge.
If you had not complied with credit card surcharging transparency regulations, you could be responsible for refunding the surcharge to the client and paying the chargeback fee.
The average chargeback cost is $190 per dispute, so it is worthwhile to avoid these whenever possible.
Step 3: Update Invoicing and Billing Systems
Your current invoicing and billing systems might not be set up to display surcharge fees. Before you implement this practice, update your systems accordingly.
List the surcharge as a separate line item, showing the amount and the percentage used to calculate it.
It could look like this:
- Service Fees: $9,000
- Surcharge (3%): $270
- Total Payment: $9,270
With FlexPoint's automated billing and payment systems, MSPs can avoid manual errors.
FlexPoint automatically calculates and displays surcharge fees on invoices and receipts. This gives clients a clear view of the total payment but also ensures compliance and accuracy.
Step 4: Monitor Compliance and Review Policies
Missouri MSPs should review their surcharge practices regularly to ensure compliance.
For example, when Visa lowered its surcharging limit from 4% to 3% in 2023, many businesses had to update their surcharging policies accordingly.
Regardless of a card network’s surcharging limit, businesses cannot profit from surcharging. As such, surcharges cannot exceed the actual processing costs a business pays.
Regardless of a card network’s surcharging limit, businesses cannot profit from surcharging. As such, surcharges cannot exceed the actual processing costs a business pays.
For example, if your MSP pays 2.4% in processing fees, you cannot charge the client more than 2.4%, even if Mastercard allows a 4% cap.
The Role of FlexPoint in Managing Credit Card Surcharging
FlexPoint helps Missouri MSPs recover payment processing fees without sacrificing positive client relationships. Its automated tools help ensure compliance, improve billing accuracy, and reduce administrative burdens.
FlexPoint offers two main payment plans:
- Interchange+ Plan
- Customer Surcharge Plan
a. Interchange+ Plan
Passing credit card processing fees to clients isn’t the right approach for every MSP. Sometimes, a business determines the risks of credit card surcharging outweigh the benefits.
A PYMNTS survey found that over three-quarters of respondents would be less likely to use credit cards if a surcharge was charged. Similarly, 40% would seek another merchant that did not charge them.
If an MSP decides that upsetting its clients is not worth recouping credit card processing fees, FlexPoint offers a payment processing plan that still helps them save.
The Interchange+ plan offers a pricing model that adjusts costs according to the specific interchange rates of each card type. With this plan, the fees MSPs pay are determined by the card used for the transaction.
Cards with lower interchange rates, like Discover, have lower processing fees.
Conversely, high-reward cards like American Express or premium credit cards often have higher interchange rates, which increases processing costs for those transactions.
b. Customer Surcharge Plan
The Customer Surcharge plan enables MSPs to apply a fixed percentage surcharge to all credit card payments. This plan shifts the cost of processing fees to clients, helping MSPs eliminate these expenses from their budgets.
Predictable fee recovery amounts help MSPs plan their cash flow accordingly, as a consistent surcharge rate is applied across all transactions.
Example:
A Missouri MSP applies a 3% surcharge to all credit card transactions:
- For a $10,000 payment, the surcharge adds $300, bringing the total payment to $10,300.
- For a $6,500 payment, the surcharge adds $195, making the total payment $6,695.
This plan is ideal for MSPs looking to recover costs directly while maintaining clear and upfront billing practices.
If an MSP does not want to pass surcharging fees entirely to clients but wants to recoup some costs, FlexPoint allows MSPs to divide processing fees with their clients.
For example, you might share a 2.5% processing fee by charging clients 1.25% and absorbing the remaining 1.25%.
For a $5,000 payment, the client would pay a surcharge of $62.50 (1.25%), and the MSP would cover the other $62.50.
Due to this flexibility, MSPs can maintain their clients' goodwill while managing costs.
How FlexPoint Supports Compliance and Transparency
FlexPoint automates credit card surcharging to guarantee adherence to Missouri regulations, federal laws, and card network policies.
The MSP-specific payment automation platform guarantees surcharges stay below the stipulated limits by automatically adding the necessary percentage to each transaction.
FlexPoint generates detailed and unambiguous invoices, thereby reducing the likelihood of payment disputes or misunderstandings.
Keeping all of the surcharging regulations in mind, here is an example of what an invoice created with FlexPoint might include:
Payment Terms:
Payment is required within 30 days of the invoice date. The surcharge complies with federal regulations (capped at 4%), Missouri laws, and card network requirements.
All credit card payments are subject to a surcharge fee. Alternative payment methods, including ACH payments and electronic transfers, are available without a surcharge.
Surcharge fees are non-refundable.
Notes:
Thank you for choosing [Your MSP Name]. If you have any questions or concerns about this invoice, please contact us at [Your Contact Information].
FlexPoint’s Integration with MSP Tools for Seamless Billing
The familiar accounting and business tools you already use can be integrated with FlexPoint for a truly seamless way to manage financial workflows.
These include:
When MSPs constantly switch between platforms, this can lead to inefficiencies, manual entry errors, and additional administrative work.
By directly integrating with popular platforms and synchronizing payment data in real-time for MSPs, FlexPoint resolves this issue. In turn, reconciliation tasks, invoicing, and billing are all streamlined.
When done manually, each process is time-consuming, especially as the number of transactions increases. Considering the number of recurring transactions most MSPs process, this quickly drains administrative resources.
For example, Xero is a widely used integration for MSPs that use FlexPoint. This connection updates payment data in real-time, providing accurate financial records without additional effort.
Consider a Missouri MSP that processes a $7,500 client payment through FlexPoint with a 3% surcharge.
The integration seamlessly updates the payment details into Xero, keeping the MSP's financial records current without manual input.
Without this automated system, the MSP would have to calculate and record the surcharge manually, input the payment data, and reconcile the transaction manually.
FlexPoint eliminates these steps, reducing errors and saving valuable time.
In addition to the above integrations, FlexPoint provides MSPs access to other features that enhance financial visibility and operational efficiency. These include branded client payment portals and real-time reporting.
Offering Flexibility in Surcharging
FlexPoint’s purpose-built features allow MSPs to adjust surcharging strategies based on the nature of their client relationships.
For example, a business might waive surcharging fees for long-term clients while applying standard surcharges for others.
This flexibility helps MSPs balance cost recovery with client satisfaction, creating a customized approach to managing processing fees.
Automated payment rules ensure surcharges comply with Visa, Mastercard, and other card network guidelines.
For instance, if a client uses Visa, FlexPoint can ensure the surcharge will not exceed the 3% cap set by Visa’s guidelines.
This automation minimizes the risk of regulatory issues and payment disputes because fees are always applied correctly.
Clients can also see surcharge details before finalizing a payment, enhancing transparency and reducing misunderstandings.
FlexPoint’spersonalized payment portals allow clients to view and pay invoices online and update payment information as needed.
For example, a client typically pays with a Mastercard, which incurs a 4% surcharge. They decide to switch to Visa to save 1% on fees.
The client can make this update directly through the payment portal, avoiding delays and reducing the need for MSP involvement.
Similarly, if a client’s credit card is about to expire, they can update the information without having to contact your MSP to do this for them.
This system streamlines operations for the MSP while increasing convenience and strengthening trust by giving clients greater control over their payment process.
Conclusion: Streamlining Payments with Effective Surcharging Strategies
Missouri credit card surcharging is appealing for many MSPs eager to offset payment processing costs.
Surcharging allows Missouri MSPs to recover payment processing fees while improving cash flow. However, success hinges on adhering to a comprehensive and compliant policy and being open with clients about surcharging practices.
When payments are handled manually, compliance can be challenging.
FlexPoint automates compliance and streamlines invoicing with transparent billing, automatic surcharge caps, and direct integration with QuickBooks, Xero, ConnectWise, and SuperOps.
With FlexPoint, Missouri MSPs have a system for managing surcharges and improving cash flow without risking clients' trust.
Enhance your MSP’s bottom line and compliance with automated credit card surcharging solutions from FlexPoint.
Stay within Missouri’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 Missouri for MSPs
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