As of January 2025, credit card surcharging in Montana is permitted. In doing so, MSPs in Montana can recover credit card processing costs that would otherwise reduce their profit margins.
As effective as this practice can be, it must be implemented thoughtfully and in compliance with federal and state laws as well as credit card brand guidelines (which will be discussed in detail in this guide).
This guide describes Montana's credit card surcharging laws, offers guidance on how MSPs can employ surcharging, and explains how an automated payment system like FlexPoint streamlines the process.
Disclaimer: This content has been prepared for informational purposes only. It 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 Montana?
Credit card processing fees for merchants range from 2% to 4% per transaction. These costs include interchange fees, assessment fees, and processor markups.
For businesses with high credit card transaction volumes and recurring payments, this means they lose a considerable portion of their profit to credit card processing fees.
Many MSPs fall into this category, so credit card surcharging can be particularly helpful in reducing expenses.
The act of credit card surcharging means passing credit card processing costs to clients rather than an MSP absorbing them on their own.. Some MSPs pass these costs entirely to clients. Others take a mixed approach by splitting the costs with clients.
Consider a Montana MSP that processes $120,000 in monthly credit card transactions with an average 3% processing fee.
The MSP incurs $3,600 in monthly credit card processing fees or $43,200 annually.
These fees can challenge cash flow and limit the MSP’s growth opportunities. Credit card surcharging delivers a promising solution.
For instance, implementing a 3% credit card surcharge shifts the $3,600 monthly fee to clients, adding $43,200 annually back to the business.
Importantly, surcharging is intended to recover costs, not generate profit. The MSP might use this recovered revenue to fund growth initiatives or operational enhancements.
However, maintaining client trust requires thoughtful implementation.
That is why some MSPs transfer only part of the cost to clients. In this case, opting for a 1.5% surcharge would have clients cover $1,800 of the monthly fees while the MSP absorbs the remaining $1,800.
This approach still adds $21,600 annually to the business, offering financial relief without entirely shifting the burden to clients.
Montana MSPs must explain this practice to clients and follow all regulations, including how they disclose these fees on invoices and in contracts.
Transparency and compliance are necessary when introducing surcharging, or you risk the loss of client trust and satisfaction and the consequences of non-compliance.
Done thoughtfully, surcharging can safeguard profitability and support sustainable growth. The following sections will detail best practices for implementing credit card surcharging.
Understanding Credit Card Surcharging Laws in Montana
No known state laws prohibit credit card surcharging in Montana as of January 2025. However, MSPs must navigate several legal and compliance requirements, including a surcharging cap set by the state.
Although the federal credit card surcharging limit is 4%, states may impose their own caps below this 4% threshold. Montana is one such state, and its laws take precedence over federal guidelines if they impose stricter limitations.
In Montana, the 3% cap established under bill LC0350.001 sets the maximum allowable surcharge for merchants and businesses.
This means Montana MSPs cannot charge a surcharge exceeding 3% of the total transaction amount, even though federal regulations allow up to 4%.
For more information on Montana’s credit card surcharge laws, visit Montana Code Annotated Section 7-6-617.
Additionally, in any U.S. state where surcharging is permitted, surcharging only applies to credit card transactions.
Merchants cannot add surcharges to debit and prepaid card transactions even when processed as credit. This regulation is outlined in the Durbin Amendment of the Dodd-Frank Act.
Businesses that apply surcharges must also explicitly notify clients before completing any transaction.
For MSPs, transparency is a cornerstone of compliance. They must list surcharges clearly on invoices or receipts so there is no room for uncertainty when their clients review their invoices and charges.
The following steps help MSPs implement surcharging in a compliant and client-friendly manner.
If you are uncertain about the rules surrounding surcharging in Montana, seek advice from a qualified legal professional.
Implementing Credit Card Surcharging for Montana MSPs
To implement surcharges effectively, MSPs must focus on education, clarity, and thoughtful execution. Clients must feel informed, not surprised, by these charges.
A PYMNTS report highlights the challenges: 76% of consumers would reconsider using credit cards with surcharges, and 40% would prefer to shop elsewhere where they won’t be charged this fee.
This is part of why it is so crucial for MSPs to communicate transparently while carefully managing surcharge levels to preserve client trust.
Here’s a practical guide to help Montana MSPs integrate surcharges into their operations.
Step 1: Establish a Clear Surcharge Policy and Structure
Surcharging policies must outline the surcharge percentage a business intends to utilize and how and when they will charge it. This information needs to be easily accessible in client agreements and contracts.
However, this policy might not be a one-size-fits-all approach. Some MSPs change their surcharge rate or structure based on the transaction size, type of client, or how the client is paying.
MSPs typically choose a fixed percentage surcharge structure, but some use a set fee or base their surcharge rates on a tiered system.
Here are examples of each surcharge structure:
1. Fixed Percentage Surcharge:
This MSP implements a 3% surcharge for all credit card transactions.Example: A client receives a $10,000 invoice for MSP services, with a 3% surcharge of $300 listed as a line item. This makes the invoice total $10,300, offsetting the credit card processing costs for the MSP.
2. Tiered Surcharge System:
An MSP applies tiered surcharges based on transaction size: 1.5% for invoices under $4,000 and 2.5% for invoices of $4,000 or more.Example: A $3,500 invoice would have a $52.50 surcharge (1.5%), while a $5,000 invoice would have a $125 surcharge (2.5%).
3. Set Fee:
A flat fee is also an option, but MSPs must ensure this flat fee does not exceed the total transaction amount, as outlined in card network and legal guidelines.
Example: An MSP implements a $75 flat fee for all invoices. For a $3,000 invoice, the total becomes $3,075.
For a $7,500 invoice, the total is $7,575. This structure offers consistency but requires careful monitoring to ensure compliance with surcharging regulations.
If the MSP charges a client a lower invoice, such as $2,000, the $75 flat fee would exceed the legal limit of 3%, as it represents 3.75% of the transaction amount.
To comply with Montana’s 3% cap, the surcharge must be adjusted to a maximum of $60 (3% of $2,000).
This demonstrates the challenge of using a flat fee structure for smaller invoices.
While flat fees provide consistency, they require careful adjustments to ensure compliance with state laws and card network rules.
For invoices below certain thresholds, a percentage-based surcharge may be a more suitable option to stay within the legal limit and maintain compliance.
Step 2: Notify Credit Card Institutions and Clients
Montana MSPs must notify credit card brands, such as Visa and Mastercard, and their clients before implementing surcharges. Most credit card networks require at least a 30-day notice.
For example, Visa explains:
“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.”
Clear communication with clients is equally important. Explain how surcharges are calculated and why they are being applied. Positioning surcharges as processing costs rather than extra fees helps clients understand and accept the charges.
Additionally, all surcharges must be disclosed on invoices to ensure transparency.
For instance, if a client expects a $7,000 invoice and sees an additional $210 (3% surcharge), they might contest the charge without prior notice, resulting in payment disputes.
Payment disputes can lead to chargebacks, which cost businesses an average of $190 per dispute, according to Swipesum.
Proper communication minimizes these risks, avoids unnecessary fees, and fosters trust in client relationships.
Step 3: Update Invoicing & Billing Systems
As you begin implementing surcharges, you must revise your invoicing process to include surcharges as distinct line items. This level of detail ensures clients see how much they’re being charged and why, reducing the risk of disputes or chargebacks.
Using an automated billing and payment system like FlexPoint, Montana MSPs can streamline this process.
FlexPoint automatically calculates and applies surcharges, clearly displaying them on invoices.
This removes the guesswork and helps create a professional and compliant surcharging process. Further details on FlexPoint will be discussed later in this guide.
Step 4: Monitor and Review Compliance
Once a surcharging policy is in place, an MSP must continually monitor this policy and its payment systems to guarantee compliance. Otherwise, according to state and federal law and card network policies, the MSP risks fines, fees, and other penalties.
This ongoing monitoring involves reviewing surcharge rates, collecting client feedback, and keeping up with legal or regulatory changes that may impact surcharging.
For example, Visa’s surcharging cap is 3%, and Mastercard’s surcharging cap is 4%.
However, state laws precede credit card brands and federal guidelines if they impose stricter surcharging caps. This means even though the Mastercard surcharging cap is 4%, Montana MSPs still cannot charge more than 3%.
Still, these fees cannot surpass the actual processing fees the MSP incurs.
Mastercard explains:
“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.”
This emphasizes the value of understanding network-specific laws and tailoring surcharging techniques accordingly.
MSPs must carefully calculate the premium they pass on to clients so it is consistent with their merchant discount rate and within the permissible limitations.
The Role of FlexPoint in Streamlining Credit Card Surcharging
Managing credit card processing fees can be challenging for Montana MSPs, significantly when recurring payments and high transaction volumes significantly impact profitability.
FlexPoint offers MSP-specific payment automation software to simplify surcharging and optimize payment workflows.
Payment Processing Plans
FlexPoint users can choose from two payment processing plans based on their needs:
- Interchange+ Plan
- Customer Surcharge Plan
a. Interchange+ Plan
With Interchange+, MSPs don’t pass all of the credit card processing costs to their clients. However, they benefit from dynamic pricing that adjusts based on the type of interchange fee of the card used.
For example, cards with lower interchange rates, such as Discover, result in reduced processing fees, while premium cards, like high-reward or corporate credit cards, incur higher costs.
This transparency helps MSPs understand their exact processing costs for each transaction.
Interchange+ pricing helps MSPs maintain competitive pricing for clients, which can be advantageous in fostering long-term relationships and gaining a competitive edge in the market.
Although this plan requires MSPs to absorb processing costs, its predictable structure ensures expenses align closely with actual transaction costs.
b. Customer Surcharge Plan
This plan lets MSPs apply a consistent percentage surcharge to all credit card transactions, passing the costs to clients and reducing business expenses simultaneously.
It offers simplicity and ensures fees are clearly disclosed. The Customer Surcharge plan provides a direct and predictable solution for MSPs looking to offset operational expenses.
FlexPoint also enables a cost-sharing approach. This means MSPs can split processing fees with clients. This balanced option helps control costs without straining client relationships.
Whether absorbing, sharing, or passing on fees, FlexPoint gives Montana MSPs the tools to streamline surcharging and enhance operational efficiency.
How FlexPoint Enhances Surcharging Compliance and Transparency
FlexPoint streamlines credit card surcharging for Montana MSPs in several ways.
For example, automating calculations and ensuring compliance with Montana’s 3% cap, federal regulations, and card network policies. This includes applying the correct surcharge percentage and ensuring charges remain within legal limits.
Invoices generated through FlexPoint are detailed and transparent, lessening the risk of misunderstandings or disputes.
For instance, a $7,500 invoice with a 3% surcharge will clearly list the $225 surcharge as a separate line item, bringing the total to $7,725.
This client’s invoice could look like this:
Notes:
Thank you for partnering with [Your Business Name]!If you have any questions about this invoice, please contact us at [Your Contact Information].
FlexPoint’s Integration with MSP Tools for Seamless Billing
With FlexPoint’s integrations, Montana MSPs can continue using their preferred platforms.
These integrations include QuickBooks Desktop, QuickBooks Online, Xero, ConnectWise, and SuperOps. These seamless integrations ensure billing and payment workflows remain efficient and familiar.
With FlexPoint’s automation of fundamental processes like invoicing, billing, and reconciliation tasks, MSPs save substantial time they would otherwise spend on manual tasks.
For instance, FlexPoint’s integration with Xero enables real-time updates for financial data. This automation ensures accurate tracking of surcharges, processing fees, and other billing details, keeping records consistent and minimizing errors.
FlexPoint’s features, like branded client payment portals and automated reporting, help MSPs manage financial operations effortlessly, leaving more time to focus on expanding their services.
Offering Flexibility in Surcharging
FlexPoint helps Montana MSPs apply surcharges within the state’s 3% cap and ensures transparency with client-friendly features.
With the ability to employ surcharging on a client-by-client basis, MSPs can cover fees for long-term clients while applying them to others, creating a flexible and fair approach to cost management.
Automated rules ensure compliance with card network guidelines, such as ensuring surcharging fees do not exceed actual processing costs or Montana’s 3% surcharge cap.
This functionality minimizes the risk of disputes or fines by handling compliance automatically.
Clients can see detailed surcharge breakdowns before completing payment, reducing misunderstandings.
Personalized payment portals also empower clients to manage payment details and minimize payment friction.
For example, clients can use this portal to update an expired card or switch to a lower-surcharge payment method like Visa.
When clients can implement these adjustments without your help, it reduces payment friction and is more convenient for you and your clients.
Conclusion: Streamlining Payments with Effective Surcharging Strategies
Montana MSPs can benefit from credit card surcharging to recover processing costs, but it requires tactical implementation.
Surcharges must be displayed on invoices and clearly communicated to clients to avoid payment disputes. MSPs must also comply with Montana’s 3% cap, federal regulations, and various card network policies.
FlexPoint introduces a comprehensive solution that automates surcharging and ensures compliance with all applicable rules.
Enhance your MSP’s bottom line and compliance with automated credit card surcharging solutions from FlexPoint. Stay within Montana’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 Montana for MSPs
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