As of February 2025, MSPs in Washington, D.C., are permitted to apply credit card surcharges to recover processing fees, helping them maintain profitability instead of absorbing transaction costs. Some MSPs in D.C. are leveraging surcharging to reduce financial strain and improve cash flow.
However, implementing surcharges requires strict compliance with Washington, D.C. regulations, federal laws, and card network policies. Failing to adhere to these rules can lead to legal complications, fines, or damage to client relationships.
This guide outlines Washington, D.C.'s surcharging laws, spotlights best practices for MSPs, and explains how payment automation tools can simplify compliance while enhancing operational efficiency.
Disclaimer: This content is for informational purposes only and should not be considered legal advice. MSPs should consult a legal professional for guidance specific to their business.
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What is Credit Card Surcharging for MSPs in Washington, D.C.?
Credit card processing fees typically fall between 2% and 4% per transaction. For MSPs that handle high-value or recurring credit card payments, these costs accumulate quickly, reducing profitability and limiting cash flow.
Every transaction includes interchange fees, processor markups, and other charges, making it increasingly expensive for MSPs to accept credit card payments.
To offset these costs, MSPs in Washington, D.C., might turn to credit card surcharging, which allows them to pass some or all of the processing fees to clients.
Some MSPs choose to shift the full surcharge amount, ensuring they recover the exact cost of credit card acceptance.
Others take a hybrid approach, absorbing part of the expense to balance cost recovery with client satisfaction.
For example, consider a D.C. MSP processing $120,000 in monthly credit card transactions at an average 2.85% processing fee.
- Without surcharging, the MSP would pay $3,420 per month in fees, totaling $41,040 annually.
- By applying a 2.85% surcharge, the MSP fully recovers the $41,040 in processing fees, preserving revenue.
Alternatively, the MSP could opt for a partial surcharge approach, charging clients 1.5% instead of the complete 2.85%.
- This approach shifts $1,800 in monthly fees to clients while the MSP absorbs $1,620.
- Over a year, this reduces the MSP’s processing expenses by $19,440, significantly improving its bottom line while maintaining goodwill with clients.
Regardless of the method chosen, transparency is fundamental for MSPs in Washington, D.C., when implementing surcharging.
Fee disclosures ensure compliance with federal regulations, local requirements, and card network policies while maintaining client trust.
With proper implementation, surcharging reduces operational expenses without disrupting client relationships.
The following sections outline how Washington, D.C. MSPs can implement surcharging effectively while ensuring compliance with all applicable laws.
Understanding Credit Card Surcharging Laws in Washington, D.C.
Although credit card surcharging is permitted in Washington, D.C., as of February 2025, MSPs must comply with federal regulations, card network policies, and any upcoming local laws that may impact credit card processing fees.
Under federal law, surcharges cannot exceed 4% of the transaction total.
However, card networks impose their own limits—Visa caps surcharges at 3%, while Mastercard allows up to 4% if the actual processing cost justifies it.
Washington, D.C., does not currently impose additional restrictions on credit card surcharging beyond federal and network rules. However, pending legislation could change how MSPs structure their surcharge policies.
Washington, D.C., officials are considering new legislation that could alter the handling of processing fees. The Fair Swipe Act of 2025, introduced by D.C. Council member Charles Allen, aims to reduce the burden of credit card fees on businesses by prohibiting processing fees from being calculated in addition to sales tax and gratuities.
If passed, this law could impact how surcharges are structured. MSPs and other businesses could only apply fees to the subtotal of a transaction, excluding taxes and tips.
This initiative is part of a broader campaign by businesses and advocacy groups, such as the Fair SWIPE (Small Businesses Working for Interchange Payment Equity) Coalition, to oppose high swipe fees.
Similar laws have already been passed in Illinois and proposed in Maryland and 13 other states. MSPs should closely monitor developments to ensure their surcharging policies remain compliant.
To illustrate the financial impact of surcharging, consider an MSP in Washington, D.C., that processes $175,000 in monthly credit card transactions.
With an average processing fee of 2.9%, the MSP incurs $5,075 in monthly costs, totaling $60,900 annually.
However, by implementing a 2.9% surcharge, the MSP fully recovers these fees, significantly improving its bottom line.
Alternatively, the MSP may choose a partial surcharge approach, applying only 1.5% while absorbing the remaining costs. This shifts $2,625 in monthly fees to clients, reducing the MSP’s processing expenses to $2,450.
Over a year, this results in $31,500 in cost savings, striking a balance between financial relief and client satisfaction.
For MSPs in Washington, D.C., disclosure is vital for both legal compliance and client trust.
Surcharges must be disclosed before a transaction is processed and itemized on invoices and receipts so clients understand the exact breakdown of charges. These charges must also be limited to actual processing costs to remain compliant with network rules.
While surcharging can help MSPs recover expenses and preserve profitability, upcoming legislative changes—such as the Fair Swipe Act of 2025—could affect how surcharges are calculated.
Washington, D.C., MSPs should consult a legal professional before implementing or adjusting their surcharge policies to avoid compliance risks.
With proper execution, surcharging reduces operational costs, increases revenue retention, and ensures sustainable growth. It allows MSPs to reinvest in their business while maintaining transparent client relationships.
It is also essential to note that surcharges can only be applied to credit card transactions. Debit and prepaid cards are strictly exempt, even if processed as a credit, due to provisions in the Durbin Amendment of the Dodd-Frank Act.
Implementing Credit Card Surcharging for Washington, D.C., MSPs
Ensuring clients fully understand surcharge fees is as crucial as listing them on an invoice. Washington, D.C., MSPs must be transparent about these charges before processing payments to maintain trust and avoid disputes.
A report from PYMNTS found that 76% of consumers would reconsider using credit cards if surcharges were applied, and 40% would actively seek alternative service providers to avoid the fees.
These figures highlight the significance of clear communication—without it, MSPs risk losing client confidence.
Surcharges are not a way to generate additional revenue but rather a tool to offset credit card processing costs. If clients perceive these fees as profit-driven, they may feel unfairly charged and take their business elsewhere.
Washington, D.C., MSPs can benefit from a structured surcharge strategy that balances cost recovery with client retention. A well-executed approach ensures compliance, reduces operational expenses, and maintains long-term client relationships.
An estimated one-third of American businesses were using credit card surcharging, a trend becoming more widespread across industries.
Step 1: Establish a Clear Surcharge Policy and Structure
To avoid confusion or frustration, MSPs should develop a clear surcharge policy that includes:
- The surcharge percentage and how it is calculated
- When and where it applies
- How clients will be notified
This policy should be included in service agreements and communicated in invoices, emails, or payment portals.
The proper surcharge structure depends on an MSP’s business model and client relationships.
Here are three common options:
a) Fixed Percentage Surcharge
A consistent percentage is applied to all credit card transactions.
Example:
A Washington, D.C., MSP invoices a client for $13,500 with a 3% surcharge.
- Surcharge amount: $405
- Total due: $13,905
b) Tiered Surcharge System
A variable rate applies depending on the transaction size.
Example:
- 2% surcharge for invoices under $5,500
- 3.5% surcharge for invoices over $5,500
For a $5,000 invoice, a 2% surcharge adds $100, bringing the total to $5,100.
For a $7,800 invoice, a 3.5% surcharge adds $273, making the final total $8,073.
c) Flat Fee Surcharge
A fixed dollar amount is applied regardless of the total invoice amount. This approach requires careful monitoring to ensure compliance with network rules, prohibiting surcharges from exceeding processing costs.
Example:
An MSP in Washington, D.C., applies a $60 surcharge to all transactions.
- Invoice for $3,200 + $60 surcharge = $3,260 (May exceed actual processing costs)
- Invoice for $10,500 + $60 surcharge = $10,560 (More likely to stay within processing cost limits)
If an MSP’s processing fee on a $1,000 transaction is 2.5%, the fee equals $25.
A $60 flat fee would exceed the actual processing cost, violating Visa and Mastercard regulations. In this case, the flat fee should be adjusted to $25 to align with compliance requirements.
Step 2: Notify Credit Card Networks and Clients
Washington, D.C., MSPs must notify Visa, Mastercard, American Express, and Discover at least 30 days before implementing surcharges.
Mastercard explains:
“A merchant's ability to apply a surcharge is conditioned on the merchant's satisfaction of certain disclosure requirements. These disclosure requirements include advance notice to both Mastercard and the merchant's acquirer of the merchant's intention to impose a surcharge no less than thirty days before the merchant implements a surcharge.”
Beyond network compliance, MSPs must also notify clients well in advance. If a client receives an invoice for $9,600 with a 3% surcharge of $288 without prior notice, they may dispute the charge.
Chargebacks can be costly—Swipesum reports the average chargeback dispute costs businesses $190 per case.
Step 3: Update Invoicing & Billing Systems
Washington, D.C., MSPs should display any surcharges as separate line items on invoices. This transparency reduces confusion and builds client trust.
Example Invoice:
- Service Fee: $11,200
- Credit Card Surcharge (3.25%): $364
- Total Due: $11,564
Automated billing platforms like FlexPoint streamline this process, correctly calculating and displaying surcharges.
Step 4: Monitor and Review Compliance
Surcharge regulations can change based on federal and card network updates and legislative proposals within Washington, D.C., – MSPs must stay informed to avoid penalties and ensure compliance.
When Visa lowered its surcharge cap from 4% to 3% in 2023, businesses that did not adjust their surcharge policies faced potential fines.
Additionally, MSPs must ensure their surcharges never exceed their actual processing costs.
For example, if an MSP pays a 2.8% processing fee, it cannot impose a 3% surcharge—even though federal law allows up to 4%.
Monitoring regulatory updates and client feedback helps Washington, D.C., MSPs remain compliant while sustaining positive relationships.
With a strategic and transparent approach, surcharging can significantly reduce costs while supporting long-term business sustainability.
The Role of FlexPoint in Streamlining Credit Card Surcharging
Managing credit card processing fees can be a persistent challenge for MSPs in Washington, D.C.. Without an effective cost-control strategy, these fees eat into revenue and complicate financial planning.
FlexPoint provides a solution by offering payment automation tools explicitly tailored for MSPs.
By simplifying surcharge management and optimizing payment processing, FlexPoint helps MSPs reduce expenses while maintaining efficiency and compliance.
Payment Processing Plans
FlexPoint understands that every MSP operates differently, so it offers two flexible payment processing plans. These plans allow MSPs to either pass on processing fees through surcharging or absorb them at competitive rates.
- Interchange+ Plan
- Customer Surcharge Plan
a) Interchange+ Plan
MSPs in Washington, D.C., can streamline payment processing with the Interchange+ plan, which aligns costs with the exact interchange rates of each card type. Because every card brand has its own set of fees, this pricing model ensures MSPs only pay what is necessary based on the transaction.
For example, an MSP processing a payment from a standard Visa card may pay a lower interchange fee than a client using a high-reward American Express card, which typically carries higher processing costs.
This plan is ideal for MSPs that want to absorb processing fees to simplify the client experience. With Interchange+, clients pay the exact invoice amount without additional charges, reducing friction in billing and payments.
b) Customer Surcharge Plan
MSPs looking to reduce processing costs can opt for the Customer Surcharge Plan, which applies a flat percentage fee to all credit card transactions. This plan minimizes financial strain on the MSP’s bottom line by shifting processing fees to clients.
For instance, an MSP processing $15,000 in credit card payments per month at an average 2.9% fee would normally pay $435 in processing costs.
With the Customer Surcharge Plan, they can pass this cost directly to clients through a 2.9% surcharge, recovering $5,220 annually.
FlexPoint ensures that surcharge calculations remain compliant with Visa’s3% limit and Mastercard’s4% cap, preventing overcharges that could result in penalties.
For MSPs that want to strike a balance, FlexPoint also enables a shared-cost model. Instead of passing the full processing fee to clients, MSPs can absorb part of the cost while applying a lower surcharge percentage.
Whether absorbing fees, passing them on, or splitting costs, FlexPoint provides the tools to manage payment processing effectively.
How FlexPoint Enhances Surcharging Compliance and Transparency
FlexPoint makes credit card surcharging seamless for MSPs in Washington, D.C., by automating calculations, ensuring compliance with federal regulations, and keeping invoices accurate.
New legislation, such as the proposed Fair Swipe Act of 2025, could potentially affect how surcharges are calculated. Therefore, MSPs need a solution that adapts to changing policies while maintaining transparency.
FlexPoint’s automation ensures that surcharge rates remain compliant, never exceeding the 4% federal limit or card network caps. It also eliminates manual errors, ensuring invoices clearly outline surcharge amounts and total costs.
Here’s an example of a Washington, D.C., MSP’s $14,500 invoice with a 3% surcharge:
Washington, D.C., MSP Client INVOICE
Company Name: Your MSP
Invoice #: 019872
Invoice Date: March 5, 2025
Due Date: May 4, 2025
Bill To:
[Client Company Name]
[Client Address]
[Client Contact Name]
[Client Email]
Description:
- Network Security Services
- Cloud Data Backup
- Server Maintenance
Subtotal: $14,500.00
Surcharge (3% of Subtotal): $435.00
Total Due: $14,935.00
Payment Terms:
Payment is due within 60 days of the invoice date. The surcharge complies with federal regulations (under the 4% limit), Washington, D.C., laws, and card network policies.
Notes:
Thank you for choosing [Your MSP]. For billing inquiries, please contact us at [Your Contact Information].
FlexPoint’s Integration with MSP Tools for Seamless Billing
FlexPoint integrates seamlessly with the tools MSPs in Washington, D.C., already use, allowing them to streamline their billing and payment processes with minimal manual effort.
These integrations include:
- QuickBooks Desktop
- QuickBooks Online
- Xero
- ConnectWise
- SuperOps
- HaloPSA
- Autotask
By connecting FlexPoint with these platforms, MSPs can automate critical financial tasks, reduce administrative work, and improve efficiency.
For MSPs in Washington, D.C., automation can be particularly valuable for:
- Invoicing: Generating accurate, transparent invoices that clearly display surcharges.
- Billing: Automatically collecting payments while ensuring fees are correctly calculated.
- Reconciliation: Keeping financial records updated in real time to prevent discrepancies.
Take, for example, an MSP using QuickBooks Online with FlexPoint.
FlexPoint instantly calculates the surcharge, applies it to the transaction, and updates the invoice when a client submits a payment. QuickBooks reflects these changes immediately, ensuring records stay accurate without manual input.
With real-time financial tracking and automated reconciliation, MSPs gain more precise insights into cash flow while reducing the risk of errors.
Additional benefits include branded client payment portals, which give MSPs a professional, streamlined way to accept payments and give clients visibility into charges.
Offering Flexibility in Surcharging
Washington, D.C., MSPs need adaptable solutions to maintain compliance and keep surcharging practices fair and transparent.
FlexPoint allows MSPs to tailor their surcharging approach based on client relationships, transaction sizes, and payment preferences.
For example, an MSP might waive surcharges for long-term clients as a loyalty incentive while applying them to new or occasional clients. This flexibility enables MSPs to balance cost recovery with client retention.
Clients can review surcharge details before submitting payment, reducing the likelihood of disputes.
FlexPoint’s personalized payment portals also allow clients to update their payment methods anytime.
For instance, if clients typically use a Mastercard but want to avoid a higher surcharge, they can switch to a Visa card with a lower fee. This option improves the payment experience while keeping surcharges compliant.
Conclusion: Streamlining Payments with Effective Surcharging Strategies
Credit card surcharging is a practical way for D.C. MSPs to manage processing fees, but successful implementation relies on compliance, transparency, and client communication.
MSPs must display surcharges on invoices and notify clients in advance to avoid confusion. Adhering to state, federal, and card network regulations ensures surcharges remain within allowable limits.
Since managing surcharges manually can be complex, automation offers a more efficient solution.
FlexPoint simplifies the entire process, correctly calculating surcharges, updating invoices automatically, and complying with regulations without constant oversight.
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, D.C., for MSPs
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