Whether you’ve been running your firm for decades or just hung up your shingle last week, if you’re not accepting credit cards, you are simply hurting yourself. There are many reasons to accept credit cards and, more to the point of this article, there are many different ways to accept credit cards.
Why Accept Credit Cards in the First Place?
Before we can discuss the how it is important to make sure we’re all on the same page as to the why of it all. The first answer any lawyer who accepts credit cards will tell you is the obvious one:
You get paid faster. Multiple studies show that when receiving a bill from their attorney, clients are much more likely to pay the bill if they can do it right from their phone or PC. The speed and likelihood of payment go even higher if the payment button is billed right on the invoice and has a short-form process.
But there are a few other reasons you may not want to overlook:
You get more business. There are many potential clients specifically looking to hire an attorney who accepts credit cards. For some clients, it’s the peace of mind that comes from knowing that they won’t be cheated and that their credit card fraud protection department is there for them. For others, it’s the ability to pay for your services over time. For others still, it’s the points or miles that they’re trying to earn that provides the greatest incentive. Regardless of the client’s motivations, you will likely find that advertising that you accept credit cards will result in an increase in clients.
You simplify your billing process. I’ve spent many an hour consulting law firms on the importance of a practice management software system. Be it Clio, MyCase, CaseOne, or any number of others, if you’re sending out your bills by electronic means, having an integrated option for the client to pay by credit card right from the email makes the billing and receiving process not only faster but easier.
What’s the Best Way for a Law Firm to Accept Credit Cards?
This question is largely dependent on two other questions, the first being:
Do you want to accept client funds into escrow from credit cards, or only allow clients to pay for amounts already due?
If you wish to be able to take up-front funds from client credit cards and have those funds deposited directly in your escrow account, you should select a law firm-specific credit card processing company. With a “normal” credit card processor, the credit card processing fee is deducted, at the end of the month, from the same account that the funds were initially deposited in. This leaves attorneys with three choices when processing to the escrow account:
- Leave extra funds from operating in the escrow account to cover the monthly fees. This option is bulky and risky if you ever underestimate expected fees.
- Charge the client a pass-through of the credit card processing fees. This is a terrible idea in many cases, as clients are not all that excited about being nickel-and-dimed on credit card processing fees. Just think about your own reaction to pulling up to a gas station and seeing the ever-enticing sign, “Same price cash or credit.” Now think about your opinion of the gas station across the street that charges that extra 10 cents.
- Deposit all credit card processed funds into your operating account, and then immediately move them to escrow when appropriate. I don’t think I need to say much about this ‘option’ other than it is likely in violation of the escrow rules in your state, and if it’s not, it should be. The risk of mistake here is unjustifiable.
Instead, with a credit card processing company that specializes in servicing law firms, you can designate where the funds go (operating for payment of invoice and escrow for retainer deposits), while all of the fees at the end of the month get deducted from the operating account. The law firm-specific processing company you’ve most likely heard of, as the leader in its field, is LawPay. Full disclosure, I use LawPay myself and am very happy with it. But it might not be right for you. Which brings us to the second question:
Do you want to integrate credit card payment into your practice management system, so that your clients receive an electronic invoice they can pay with a click?
If you do, LawPay is the main game in town. It integrates with just about every practice management system, including Clio (the one I use). By integrating your practice management and credit card processing systems, you can have a completely seamless process where your time is entered into your practice management system, which generates a monthly invoice, sends it electronically to your client, who then pays the bill online and your practice management system receives and records payment on the invoice, handling your books automatically and providing your client with an electronic receipt, and you with electronic notice. Collections couldn’t get any easier.
The two major drawbacks to LawPay are:
- It is not the least expensive if you do a substantial amount of credit card processing.
- It batch processes your deposits for the entire day (or sometimes even a few days), making it a bit of a hassle to reconcile and figure out which payment got deposited when.
If you don’t accept up-front retainers and are not looking for integration with a practice management system, there may be better options for you.
If you’re only looking to accept credit cards online, and do not have a large volume of monthly credit card revenue, you may want to get a starter account with something like Square (a couple of competitors offering similar services would be PayPal and Amazon Payments). Personally, of the three, Square is my favorite, being incredibly easy to use, having no monthly fee (like LawPay) and only charging you per transaction (like LawPay). It allows you to send out invoices (links for clients to pay a specific amount), as well as to accept credit cards at the point of sale (in person or over the phone). They have a good and simple credit-card reader that is compatible with just about every device out there and they offer a very nice set of easy to use apps for both Apple and Android devices. Again, full disclosure, prior to switching to LawPay (for practice management system integration and to accept escrow deposits), my credit card processing service was Square.
Traditional High-Volume Monthly Plans:
Alternatively, if you don’t accept upfront retainers and you have a high volume of credit card transaction (in terms of total revenue, not number of transactions), you may want to consider a traditional credit card processing service. While many businesses can find newer and more exciting solutions, in the end, all of the solutions above charge just about 3% of the transaction in credit card processing fees. This is perfectly acceptable if you do less than $2,000/month in business, or if you’re willing to pay a premium for escrow account segregation or practice management system integration, but if you’re running a practice where those features aren’t worth a premium and you’re processing over $2,000/month, you have a cheaper choice.
You can sign up with any number of “regular” credit card processing companies, which will provide you a web portal where you can log in and process credit card payments. For an extra fee, they will provide you with a credit card processing terminal, or even a card reader for your Android or Apple device, which will work with their app and allow for payments on the go. You will also pay them a monthly fee. This fee will range from $10-$50 and may include equipment rental fees. In exchange, you will get a lower percentage fee for each transaction. This will save you roughly 1-1.5%. You should be aware that the rates differ from each processing company, and will vary depending on the type of card (Visa/MC/AmEx/Discover).
You can find traditional credit card processing products available from hundreds of vendors, including your own bank, Costco, BJs, Intuit, and a plethora of others. If you happen to use QuickBooks for your billing and bookkeeping, the option of using Intuit’s product may be most appealing to you, as you would be able to accept payments directly within QuickBooks itself.
While I do presently use LawPay, I did at one point use credit card processing from Costco, followed by the QuickBooks integrated service from Intuit. As such, I have used all of the types of payment discussed here. I am not in any way compensated by any of the processing services for my options in this article.
Should You Accept Other Forms of Payment?
As a final note, you should remember that while credit cards should be your top priority, many younger clients prefer alternative methods of payment altogether. Depending on your type of practice, you may want to consider accepting PayPal, Android, and Apple Pay, and in time, maybe—just maybe, at some point in the future—you should accept Bitcoin… but we’ll leave that for another day.