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How to Determine Your Effective Payment Processing Rate
There’s no way around it—hidden fees are some of the most annoying things in business (and in life).
Whether it’s a hidden “resort” fee for a hotel that definitely isn’t a resort or hidden fees for business services, these fees can have a big impact on your bottom line.
Among the trickiest to track for law firms? Payment processing fees with your credit card processor.
These (often hidden) payment processing fees can really cause law firm profits to take a hit. Yet, there are strategies you can use to assess these costs and prevent them from piling up. To see if your firm is overspending, take a look at your effective payment processing rate.
What are online payment processors?
Today, the vast majority of law firm clients prefer to pay their bills online. It’s faster, easier, more convenient, and can often leverage autopay features that reduce (if not eliminate) worries about unwieldy accounts receivable.
To run these payments, though, law firms need an online payment processor.
The benefits (and challenges) of online payment processors
Using an online payment processor can bring huge benefits to law firms.
Law firms are more likely to receive on-time payments from clients through online billing, and because credit card payments clear faster than paper checks, firms can also access their funds much earlier. As a result, law firms have more money in their accounts and spend less time chasing down payments.
But firms pay for the service of having online payments processed for them, and this can come with hidden fees.
Yes, accepting credit cards benefits your law firm, but you need to find the right platform, one without hidden processing fees that eat into your liquidity.
Here’s how to assess legal payment processing, including how to identify hidden credit card processing fees and ensure you’re using the best payment processor for your law firm.
Streamline Cash Flows and Get Paid Faster with Rocket Matter Pay
Law firms have plenty of good reasons to offer online credit card processing:
- Faster, more reliable payments
- Less administrative time spent processing checks and reconciling books
- Offering clients the payment options they actually prefer
- But why have so many firms chosen not to take advantage of all the benefits of credit card processing?
Your payment processing rate is not a fixed cost
Every platform charges some sort of rate to use its processing system for client credit cards. Often, this comes in the form of a base rate, with additional (and sometimes hidden) fees tacked on.
Many companies offer a low introductory rate but add on penalties for certain types of transactions. Every single transaction can have a different associated rate, depending on how it’s processed and the card type.
A lot of hidden fees come from certain types of transactions, including:
- Doing business internationally
- The size of your transaction
- Amex (we’re just being honest, this one can add up)
But there are also other types of hidden fees that can add to your final monthly total, including:
- Chargeback fees
- Transaction fees
- Retrieval fees
- Discount rate fees
- Gateway fees
- Monthly fees
- Return fees
- Annual fees
- Risk assessment fess
- PCI fees
- Regulatory fees
- Corporate card fees
- IRS fees
- Voice verification fees
- Account on file fees
The worst part about hidden fees is that you may not see this difference upfront, even though the charges will definitely affect your bottom line.
If this all feels complicated, well, it can be. And that’s not by accident. Many online processors assume that their clients will simply pay the bill, no questions asked. They don’t expect you to read the fine print.
Yet to be profitable, law firms must take a hard stance against unnecessary or avoidable expenses—and these fees can easily qualify as “unnecessary” and “avoidable.”
To eliminate these costs, you first have to know what you’re dealing with. And this begins with assessing your effective payment processing rate.
Find out if you have hidden fees by calculating your effective payment processing rate
The only way to find out if your payment processor is hitting you with hidden fees is to calculate your effective processing rate. This refers to your total processing fees, divided by the total sales volume on your statement.
For example, say your total billings for last month were $200,000, and your total fees equally $11,200. Your effective rate is your fees divided by your payments:
$11,200.00 / $200,000.00 = 0.056 or 5.6%
If your effective rate isn’t your processor’s promised rate, then you’re most likely being charged hidden fees.
What to look for in a payment processor
After examining your effective processing rate, you might want to consider switching payment processors. How do you choose the right one going forward?
First off, look for a payment processor who can correctly manage your payments for operating accounts, trust accounts, and IOLTA accounts. This often means turning to legal-specific payment processors.
Law firms also need a processor that integrates directly with your legal practice management system. Otherwise, you’re just adding more accounting and administrative load to your practice. An integrated payment processor helps streamline your firm’s operations and relieve pain points in your billing workflow.
Look for payment processors with clearly published rates. Keep an eye out for:
- Early termination fees
- PCI compliance security fees
- Junk fees or bait-and-switch tactics
Doing a bit of research now will save you money down the road.
Avoid hidden fees with Rocket Matter Pay
Your law firm doesn’t have to lose money every month to hidden fees. Rocket Matter Pay has everything you need to process client invoices and increase your collection rate while maintaining compliance and avoiding hidden fees.
Rocket Matter Pay is a built-in payment processing platform that makes online payments easier than ever. Streamline your payment processing with tools like:
- Online invoicing
- Payment plans
- Recurring billing
- IOLTA trust compliance
- Auto-withdrawal set-up capabilities
With Rocket Matter, firms always get transparent pricing. No hidden fees, no penalties, no nasty surprises. Instead, law firms enjoy a competitive low rate for every single card type, including Amex. Plus, with Rocket Matter Pay, law firms can get paid in as little as 12 hours and simplify their accounting with a seamless Quickbooks integration.
It’s all in the fine print
No one likes a bait-and-switch contract, especially lawyers.
Online payment processing is an important feature for law firms. It helps build the best possible client experience, and it provides faster avenues to liquidity and on-time payments for your firm. Look for the payment processor that will have the greatest positive impact on your bottom line.
With Rocket Matter, your firm will never have hidden fees. Sign up for a free demo to see how Rocket Matter Pay can streamline your billing cycle today.
Streamline Cash Flows and Get Paid Faster with Rocket Matter Pay
Law firms have plenty of good reasons to offer online credit card processing:
- Faster, more reliable payments
- Less administrative time spent processing checks and reconciling books
- Offering clients the payment options they actually prefer
- But why have so many firms chosen not to take advantage of all the benefits of credit card processing?
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