As of February 2025, Washington MSPs are permitted to apply credit card surcharges to recover processing costs and manage operational expenses. Surcharging helps MSPs offset transaction fees rather than absorb them entirely to maintain profitability while continuing to offer flexible payment options.
However, implementing surcharges requires strict adherence to federal regulations and the policies set by major card networks. Failure to comply with these requirements can result in fines, legal issues, or damage to client relationships.
This guide explains Washington’s credit card surcharging rules, outlines best practices for MSPs, and details how FlexPoint helps MSPs stay compliant while optimizing payment processes.
Disclaimer: This content is for informational purposes only and should not be considered legal advice. MSPs should consult a legal professional for specific guidance related to their business in Washington.
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What is Credit Card Surcharging for MSPs in Washington?
Credit card surcharging helps MSPs in Washington manage the cost of payment processing by shifting some or all of the fees to clients.
Processing fees typically range from 2% to 4% per transaction, covering interchange fees, network assessments, and processor markups. These expenses can add up quickly, especially for MSPs handling high transaction volumes or recurring payments.
For example, an MSP in Washington processing $85,000 in monthly credit card transactions with an average processing fee of 2.9% would pay $2,465 per month in fees—totaling $29,580 annually.
By applying a 2.9% surcharge, the MSP can pass this cost to clients, eliminating nearly $30,000 in yearly processing fees. This frees up cash flow for software investments, staffing, or other operational improvements.
Some MSPs take a hybrid approach, covering part of the cost while applying a lower surcharge to clients.
For instance, if the MSP sets the surcharge at 1.5%, it shifts $1,275 per month to clients while still covering $1,190 internally. Over a year, this reduces expenses by $15,300, balancing cost recovery and client satisfaction.
Regardless of the approach, transparency is vital. MSPs in Washington must follow laws and card network regulations so that clients are informed about any fees before completing transactions.
Failing to disclose surcharges clearly can result in disputes, chargebacks, or compliance violations. MSPs should communicate all fees upfront to maintain trust and adhere to Washington’s surcharging guidelines.
Refer to the Washington State legislature and MRSC guidelines for credit card acceptance to learn more.
The following sections outline Washington’s surcharging laws and best practices for compliance and client satisfaction.
Understanding Credit Card Surcharging Laws in Washington
As of February 2025, MSPs in Washington can apply credit card surcharges to offset payment processing fees, but they must adhere to state laws, federal regulations, and card network policies.
Washington State follows the federal maximum surcharge limit of 4% for credit card transactions.
There is no state-imposed lower cap, meaning MSPs can apply surcharges up to 4% as long as they comply with federal regulations and card network rules and do not exceed actual processing costs.
For example, Visa limits surcharges to 3%, and other networks, including Mastercard, American Express, and Discover, allow up to 4%.
Again, this is provided the surcharge does not exceed the MSP’s actual credit card processing cost, known as the merchant discount rate (MDR).
For example, if an MSP’s payment processor applies a 3.5% fee on credit card transactions, the MSP cannot charge clients a higher rate than that. Instead, the surcharge must be capped at 3.5%.
Surcharges cannot be applied to debit or prepaid cards, even if those transactions are processed as credit. The Durbin Amendment of the Dodd-Frank Act mandates this restriction.
Transparency is a fundamental requirement in Washington. MSPs must disclose all surcharge details before a transaction is completed. This includes listing surcharge amounts on invoices and receipts so clients fully understand the additional cost.
MSPs in Washington who fail to follow these rules risk penalties, disputes, or damage to client relationships.
If an MSP is unsure about proper implementation, consulting a legal professional can help ensure compliance with Washington’s surcharge regulations.
Implementing Credit Card Surcharging for Washington State MSPs
Adding a credit card surcharge may seem straightforward, but proper planning and clear communication are integral to avoiding payment disputes and ensuring compliance.
MSPs must follow federal laws, card network policies, and industry best practices to maintain transparency and prevent chargebacks.
A well-structured surcharging approach helps MSPs recover credit card processing fees while maintaining strong client relationships.
Below is a step-by-step guide to implementing surcharges correctly in Washington.
Step 1: Establish a Clear Surcharge Policy and Structure
A formal surcharge policy lays the foundation for compliance and client trust.
This policy should specify the surcharge percentage, calculation method, and how fees will appear on invoices. Transparency helps avoid surprises and reduces the risk of payment disputes.
Depending on their billing model, Washington MSPs can implement surcharges using different structures.
The three most common options are:
a) Fixed Percentage Surcharge
MSPs apply a consistent surcharge percentage to every credit card transaction.
Example:
An MSP adds a 2.9% surcharge to all credit card payments.
If a client’s invoice is $12,500, the surcharge would be $362.50, bringing the total to $12,862.50.
b) Flat Fee Surcharge
Regardless of the invoice total, a fixed dollar amount is added to each credit card transaction. However, MSPs must ensure the flat fee never exceeds their actual processing costs.
Example:
An MSP applies a $60 surcharge per transaction.
If a client pays a $4,000 invoice, the total would be $4,060.
If an MSP sends an invoice for $300, and their processing fee is 3%, they cannot charge more than $9 in surcharges.
Overcharging would violate compliance rules.
c) Tiered Surcharge
This model applies different surcharge rates based on the invoice total.
Example:
- 1.5% surcharge for transactions under $5,000
- 3% surcharge for transactions over $5,000
The surcharge for a $3,800 payment would be $57 (1.5%).
The surcharge for a $6,200 payment would be $186 (3%).
MSPs should outline their surcharge structure in client contracts to minimize confusion and ensure compliance with Washington’s regulations.
Step 2: Notify Credit Card Institutions and Clients
Before applying surcharges, Washington MSPs must inform credit card networks like Visa, Mastercard, American Express, and Discover. Each network has specific requirements for notifying them before surcharges are implemented.
Visa requires at least 30 days' advance notice before a surcharge can be applied. Most networks offer online forms for submitting this notice.
Visa’s policy states:
“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.”
Equally important is informing clients. Without prior communication, surcharges can lead to disputes, chargebacks, and potential financial losses.
Here’s an example of what can happen without proper disclosure:
A client receives an invoice for $9,000, but they see an unexpected $270 surcharge (3%). If they weren’t informed beforehand, they might dispute the transaction.
Disputes are costly. The average chargeback costs businesses $190 per dispute, according to Swipesum. MSPs can prevent these unnecessary expenses by clearly communicating surcharge policies before implementation.
Ways to notify clients include:
- Sending an email announcement before implementing surcharges
- Clearly listing surcharge details on service agreements
- Including surcharge explanations in client onboarding materials
Step 3: Update Invoicing & Billing Systems
Once the surcharge policy is in place, invoicing and payment systems must be configured to display surcharges transparently.
Surcharges should always appear as a separate line item on invoices. Clients should see exactly how the fee is calculated and how it impacts their total payment.
Example invoice:
- Service Charges: $11,200
- Surcharge (2.9%): $324.80
- Total Due: $11,524.80
Many MSPs use automated billing platforms to handle surcharge calculations.
FlexPoint’s billing system automatically calculates and applies surcharge fees, ensuring accurate invoices and reducing manual errors. With automation, MSPs avoid compliance risks while maintaining an optimal client payment experience.
Step 4: Monitor and Review Compliance
Washington MSPs must regularly review their surcharge policies to remain compliant with federal regulations and card network rules.
As of February 2025, Washington follows federal guidelines, allowing MSPs to apply surcharges up to 4% of the transaction total.
However, card networks impose their own limits:
- Visa caps surcharges at 3%
- Mastercard, American Express, and Discover allow up to 4%, but only if the actual processing fee is that high.
MSPs cannot charge more than their actual processing cost, even if the federal or card network limit allows a higher amount.
Example:
If an MSP’s processing fee is 2.6%, they cannot apply a 3% surcharge. The maximum they can legally charge is 2.6%. Overcharging can lead to fines, lost surcharge privileges, and even forced refunds to clients.
To maintain compliance, Washington MSPs should:
- Review surcharge policies quarterly and adjust fees if processing rates change
- Keep records of surcharge-related client communications to protect against disputes
- Monitor updates from Visa, Mastercard, and regulatory agencies to stay compliant with evolving rules.
The Role of FlexPoint in Streamlining Credit Card Surcharging
FlexPoint offers strategic payment solutions designed to help MSPs recover processing fees while maintaining compliance with Washington’s credit card surcharging laws.
With multiple billing models, MSPs can decide whether to absorb, split, or pass on credit card fees. This flexibility allows MSPs to control costs without disrupting client relationships.
Payment Processing Plans
FlexPoint provides two primary payment models to help MSPs manage processing fees:
- Interchange+ Plan
- Customer Surcharge Plan
Each plan is designed to fit different business strategies, depending on whether an MSP prefers to absorb, share, or shift processing fees to clients.
a) Interchange+ Plan
The Interchange+ Plan is ideal for MSPs who prefer to absorb processing fees rather than pass them directly to clients.
Interchange rates vary depending on several factors, including the card type, transaction method, and card issuer.
For example:
- A Visa debit card transaction may carry an interchange fee of 0.8% + $0.15, while a high-reward American Express card could cost as much as 3.25% + $0.10 per transaction.
- In-person transactions generally have lower interchange rates than online payments, where the risk of fraud is higher.
The Interchange+ Plan provides complete visibility into these costs, allowing MSPs to track actual processing fees and adjust pricing models accordingly.
This plan works well for MSPs that work processing costs into their service pricing rather than charging clients an additional fee.
Example Scenario
An MSP in Seattle processes $50,000 in monthly credit card transactions.
- With an average interchange rate of 2.75%, the MSP pays $1,375 in monthly processing fees ($16,500 annually).
- Using Interchange+, the MSP maintains simple, predictable pricing for clients while ensuring that fees remain manageable.
b) Customer Surcharge Plan
For MSPs looking to eliminate processing costs, the Customer Surcharge Plan shifts the burden of credit card fees to the client.
Instead of absorbing processing fees, the MSP adds a fixed surcharge percentage to each credit card transaction, allowing clients to cover the extra expense.
Example Scenario
- An MSP in Spokane processes $75,000 in monthly credit card transactions.
- The processing fee is 3%, which amounts to $2,250 in monthly fees ($27,000 annually).
- The MSP fully recovers this cost by implementing a 3% surcharge, redirecting those funds toward business development.
This plan is especially useful for MSPs that operate on thin margins or handle high-ticket transactions, where processing fees would otherwise become a significant expense.
Some MSPs take a balanced approach, covering part of the processing fees while passing the rest to clients. This strategy helps reduce financial strain while maintaining client goodwill.
Example:
- Instead of a 3% surcharge, an MSP in Tacoma applies a 1.5% fee to client payments while covering the remaining 1.5% internally.
- If the MSP processes $60,000 in credit card transactions each month:
- The total processing fee of 3% is $1,800.
- With a 1.5% surcharge, the client covers $900, and the MSP absorbs $900.
- Over a year, this saves the MSP $10,800 without placing the full burden on clients.
FlexPoint supports partial surcharging, allowing MSPs to customize their payment strategies while remaining compliant with Washington regulations.
The best payment model depends on an MSP’s business structure, pricing model, and client relationships.
- MSPs that prefer stable, predictable pricing may choose the Interchange+ Plan, where processing fees are included in service costs.
- MSPs that want to eliminate credit card fees may opt for the Customer Surcharge Plan, where clients take on the expense.
- MSPs that want a middle-ground approach can split the costs, absorbing part of the fee while passing the rest to clients.
FlexPoint offers automated invoicing and compliance tools, ensuring surcharges are:
- Accurately calculated based on transaction type and card brand.
- Clearly displayed on invoices and receipts as separate line items.
- Consistently applied in line with Washington’s regulations.
How FlexPoint Enhances Surcharging Compliance and Transparency
FlexPoint streamlines the surcharging process for Washington State MSPs, ensuring all practices stay within Washington’s surcharge regulations, as well as federal laws and card network policies.
This means MSPs confidently apply credit card surcharges, knowing they are compliant with state allowances, the federal 4% cap, and specific card brand rules like Visa’s 3% limit.
Here’s an example of a typical invoice for a Washington-based MSP processing a $10,500 invoice with a 3% surcharge:
Washington MSP Client INVOICE
Company Name: Your MSP
Invoice #: 127689
Invoice Date: March 15, 2025
Due Date: April 14, 2025
Bill To:
[Client Company Name]
[Client Address]
[Client Contact Name]
[Client Email]
Services Provided:
- Cloud Infrastructure Deployment
- Cybersecurity Risk Assessment
- 24/7 IT Support & Maintenance
Subtotal: $10,500.00
Credit Card Surcharge (3% of Subtotal): $315.00
Total Amount Due: $10,815.00
Payment Terms:
Payment is due within 30 days of the invoice date. The above surcharge complies with federal regulations (capped at 4%), Washington State laws, and card brand requirements. Surcharges are never applied to debit or prepaid card transactions, as mandated by federal law.
Notes:
Surcharges are listed separately for full transparency and only cover actual credit card processing fees. If you have any questions about this invoice or surcharge policies, please contact us at [Your Contact Information].
FlexPoint’s Integration with MSP Tools for Seamless Billing
Managing credit card surcharges efficiently requires automation and precision. FlexPoint seamlessly connects with the most commonly used MSP accounting and payment platforms, ensuring smooth invoicing, billing, and reconciliation.
Washington MSPs can integrate FlexPoint with the following:
- QuickBooks Desktop
- QuickBooks Online
- Xero
- ConnectWise
- SuperOps
- Autotask
- HaloPSA
These integrations minimize manual data entry, reduce administrative workload, and help maintain accurate financial records.
For example, when an MSP links QuickBooks Online with FlexPoint, surcharge details are automatically recorded in real time.
Instead of manually adjusting invoices or reconciling payments, FlexPoint syncs these details seamlessly.
In high-volume billing cycles, keeping track of surcharge adjustments can be time-consuming.
FlexPoint’s automatic reconciliation ensures that:
- Payment data flows directly into accounting software without manual updates.
- Surcharges appear clearly in financial summaries and reports.
- Financial records remain audit-ready, preventing discrepancies during tax filing or financial analysis.
A seamless payment experience is essential for client satisfaction and trust. FlexPoint provides custom-branded payment portals, allowing Washington MSPs to offer a professional, user-friendly billing experience while maintaining surcharge compliance.
Offering Flexibility in Surcharging
FlexPoint gives Washington MSPs the flexibility to manage surcharges strategically, ensuring that fees are applied in a way that supports business growth without jeopardizing client relationships.
Rather than using a one-size-fits-all approach, MSPs can adjust surcharge policies based on client value, transaction size, or payment method.
For example, an MSP serving enterprise clients in Washington may choose to waive surcharges on large contracts while applying them to smaller, high-frequency transactions.
This approach minimizes friction with key accounts while still offsetting credit card processing costs.
Conclusion: Streamlining Payments with Effective Surcharging Strategies
A well-planned surcharging approach includes clear policies, upfront communication, and automated billing tools that ensure transparency and compliance.
When executed properly, surcharging helps MSPs protect revenue while giving clients a fair and predictable payment structure.
Enhance your MSP’s bottom line and compliance with automated credit card surcharging solutions from FlexPoint.
Schedule a demo to see how FlexPoint can transform your financial operations and maximize profitability.
Additional FAQs: Credit Card Surcharging in Washington for MSPs
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