Look, we need to have a chat about those pesky credit card processing fees that are slowly eating away at your margins. If you’re running an MSP, you’ve probably found yourself staring at your monthly statement wondering why the heck you’re paying so much just so your clients can conveniently swipe their plastic.
Let’s cut through the nonsense and look at your options as a B2B service provider.
Four Ways to Handle the Credit Card Fee Conundrum
Option 1: The Convenience Fee (AKA “The Eye Roll”)
Some MSPs slap on a 3% “convenience fee” when clients pay with credit cards. Let’s be real—there’s nothing convenient about paying extra money. It’s about as “convenient” as airplane Wi-Fi that costs $19.99 and works half the time.
The Data Behind the Dislike
The numbers tell a pretty clear story about how businesses and their customers feel about these fees. While 71% of consumers actively avoid businesses with credit card surcharges, the B2B world isn’t much different—a whopping 78% of business cardholders consider payment surcharges unfair. That’s not just a minor preference; it’s a strong signal about what your clients think of these fees.
The FTC isn’t a fan either. They’ve literally categorized these as “junk fees” in their October 2022 rulemaking initiative. And perhaps most telling, 86% of B2B customers indicate they would likely take their business elsewhere if a frequent vendor implemented surcharges. When J.D. Power examined customer satisfaction, they found businesses implementing credit card surcharges scored 24 points lower on their scale (628 vs. 652 on a 1,000-point scale).
When a client sees that 3% fee pop up at checkout, they’re not thinking “what a reasonable business decision.” They’re thinking “seriously?” And frankly, that’s not the relationship you want with people trusting you with their IT infrastructure.
Legal and Regulatory Headwinds
Beyond client perception, convenience fees face increasing scrutiny in the regulatory landscape. The CFPB issued a 2022 advisory specifically targeting “pay-to-pay” fees in financial services, creating a ripple effect across service industries. Many states have restrictions specifically targeting convenience fees while being more permissive of direct passthroughs. Professional ethics guidelines in multiple industries discourage surcharges even where legally permissible.
The Pax8 Cautionary Tale
You don’t need to look far to see how these fees can backfire in the MSP world. Pax8’s recent experience implementing credit card surcharges serves as a perfect case study. Their announcement triggered significant backlash within the MSP community—the very people they were trying to serve. MSPs cited the loss of credit card rewards, points, and cashback benefits as deal-breakers, and many publicly explored switching to alternative distributors.
When MSPs themselves react this negatively to surcharges, it should make you pause and consider: if you find these fees frustrating when you’re the client, imagine how your own clients might feel if you implement them. There’s a better way to handle this challenge, which brings us to our next approach.
Option 2: The ACH Discount Strategy (The “Smart Cookie” Approach)
This is where you price your services at your standard rate, then offer a discount when clients pay via ACH transfer. Instead of penalizing credit cards, you’re rewarding people for saving you money. Psychology 101, people!
The Psychology of Gain-Framing
Why does this approach work so well? It’s all about perception and psychology. Research shows that 83% of B2B buyers want payment flexibility—they just don’t want to feel penalized for their choices. Framing a financial incentive as a 5% discount feels like a win for your client, not a punishment. It creates a positive association rather than a negative one.
The numbers back this up. MSPs report saving more than $10,000 annually when transitioning clients to ACH. And unlike surcharges (which 57% of business customers believe should be illegal), discounts are viewed as incentives rather than penalties.
It’s like when the grocery store gives you $0.10 off per gallon if you pay with cash. You feel like you’re getting a deal, not being punished for using your card. This positive framing makes all the difference in how your clients perceive your payment options.
Implementation Best Practices
For this approach to really shine, it needs thoughtful implementation. Clearly communicate that the discount is for the payment method itself, not just early payment (though you can certainly combine both incentives). Many successful MSPs consider tiered incentives—with 66% of B2B companies using some form of tiered discount structure to encourage preferred payment behaviors.
The practical side matters too. Make the ACH setup process painless with clear instructions. Ensure your accounting system properly tracks these discounts to avoid reconciliation headaches later. The good news is you’re not swimming against the tide here—68% of enterprises now use ACH credits for vendor payments, so the trend is in your favor.
Understanding the B2B Cash Flow Angle
Here’s where understanding your business clients really matters. For many of them, corporate cards serve as de facto operating lines of credit. Their payment terms are a critical part of their cash flow management strategy, not just a convenience choice. Some clients may prefer credit cards despite a discount if they need the 30-45 day float to manage their operations smoothly.
By acknowledging these realities while still offering incentives for ACH, you show that you respect their business needs while protecting your own margins. This balanced approach creates a partnership mentality rather than a transactional one. However, for clients who insist on using credit cards, there’s another option that maintains transparency without the relationship damage of convenience fees.
Option 3: The Transparent Passthrough (The “Cards on the Table” Method)
This approach is painfully simple: show the processing fee as its own line item and make it clear you’re not making a cent from it. It’s just math—you’re simply passing along exactly what the payment processors charge.
The Power of Transparency
In a world of hidden fees and confusing pricing structures, there’s something refreshing about simple honesty. Research shows that 92% of consumers demand upfront clarity about fees. When you separate the processing cost from your actual service cost, you help clients understand the true economics of different payment methods without feeling manipulated.
The B2B data is particularly revealing. About 41% of business clients view transparent fee passthroughs positively, compared to just 12% for convenience fees. That’s a significant difference in perception for what amounts to the same economic outcome. Why? Because the messaging matters. This approach basically says, “Look, we don’t make the rules of the financial universe, we just live in them. This is what Visa/Mastercard charges us.”
Technical Implementation Considerations
Getting this right requires attention to detail. Your invoicing system needs to clearly itemize the processing fee as a separate line item. Be precise about the actual cost—which typically ranges from 3.15% to 3.5% for Visa/Mastercard transactions. Keep detailed records showing you’re not profiting from the fees to maintain the trust this approach builds.
The effort pays off. MSPs using this approach report reducing payment disputes by 42% compared to convenience fee models. When clients understand exactly what they’re paying for and why, they’re less likely to push back or feel nickel-and-dimed.
B2B-Specific Considerations
Not all clients are created equal, and your approach can reflect that. Many successful B2B companies implement selective fee passthroughs, waiving fees for premium clients or small transactions. This recognizes that the relationship value sometimes outweighs the processing cost.
“On Account” orders paid by credit card deserve special consideration. Some B2B merchants report 25-75% net margin reductions when combining extended credit, early payment discounts, and processing fees. In these cases, a transparent discussion about payment economics becomes even more important.
Long-term clients especially appreciate the honest approach. By explaining the business reasoning behind your payment policies, you transform what could be a contentious transaction detail into an opportunity to deepen understanding and trust. But what about MSPs who have always just absorbed these costs? Let’s look at why that approach might be costing you more than you think.
Option 4: The Status Quo (The “I’ll Just Eat It” Approach)
Many MSPs simply absorb credit card processing fees as a cost of doing business. While this seems client-friendly on the surface, it’s the financial equivalent of a slow leak in your profits.
The Hidden Financial Impact
Let’s talk about what this actually costs you. When you absorb credit card fees, you’re essentially taking a 2.9-3.5% pay cut on every credit card transaction. For an MSP billing $500,000 annually, that’s up to $17,500 disappearing from your bottom line—money that could be funding a new hire, better security tools, or improved service capabilities.
What makes this approach particularly problematic is that you’re incentivizing the payment method that costs you the most. Clients have no motivation to consider alternatives when the cost is invisible to them. Meanwhile, these processing costs tend to increase over time but rarely get factored into your pricing adjustments, gradually eroding your margins year after year.
It’s like paying for everyone’s coffee at the office meeting every day. Sure, people appreciate it, but they’d probably still show up if you stopped. Meanwhile, you’re out thousands of dollars a year on something they don’t even truly value.
The Competitive Disadvantage
The impact goes beyond direct costs. With 30% of MSPs reporting cybersecurity costs exceeding $80,000 per incident, absorbing payment processing fees limits your ability to invest in critical security infrastructure. Every dollar spent on unnecessary processing fees is a dollar not invested in your business growth or client protection.
Industry data shows this matters. MSPs with higher net margins (20-30% vs. industry average 17%) tend to be those with active payment cost management. In fact, benchmarking reveals MSPs who address payment costs show 37% lower operational expenses compared to peers who don’t.
While being client-friendly is important, there’s a difference between genuine value-adds and hidden subsidies that clients don’t even recognize. The good news is that there’s a better way to approach this that preserves both client relationships and your bottom line. So how do your clients actually feel about these different approaches?
What Your B2B Clients Actually Think
Let’s skip the marketing fluff and look at what real business clients think about these approaches. The data from multiple B2B payment studies paints a clear picture:
When faced with convenience fees, only about 12% of business clients have a positive reaction. The majority view them as hidden fees tacked on at checkout, often saying things like, “Are they serious with this?” to their colleagues. This perception damages your brand reputation well beyond the transaction itself.
By contrast, ACH discounts enjoy a 68% positive perception rate. Clients appreciate the opportunity to save money and typically frame it positively: “Oh nice, I can save money!” When they talk to others, they describe it as “They give a discount if you pay directly” – a much more positive framing.
The direct fee passthrough model lands somewhere in the middle with 41% positive perception. While not as popular as discounts, clients appreciate the honesty, often thinking, “Well, at least they’re honest” and telling others, “They’re upfront about their costs.”
For MSPs who simply absorb the costs, about 56% of clients view this positively, but many don’t even notice or appreciate the subsidy you’re providing. They simply think, “That’s just how they do business” without recognizing you’re leaving money on the table.
Notice the massive gap between convenience fees and other approaches? That’s not just personal preference—it’s documented B2B client behavior that should inform your decision-making process.
The Bottom Line: It’s About Trust, Not Transactions
Here’s the thing—you’re not just collecting payments; you’re building relationships.
When MSPs use the transparent fee passthrough model, they report 23% higher client retention rates compared to the convenience fee approach. That’s not just good ethics; it’s good business. This is the kind of statistic that should make every MSP take notice, because client retention is the lifeblood of your recurring revenue model.
Let’s be real: nobody likes paying fees. But everybody appreciates honesty. When you frame processing fees as a shared reality rather than a profit center, clients feel respected, not nickel-and-dimed. This approach builds trust that extends well beyond the payment transaction itself.
The Real Cost of Credit Card Processing for MSPs
Let’s talk actual numbers so you can see what’s at stake:
| Annual Revenue | CC Processing Fee | Annual Cost to MSP | Five-Year Cost |
|---|---|---|---|
| $250,000 | 3.0% | $7,500 | $37,500 |
| $500,000 | 3.0% | $15,000 | $75,000 |
| $1,000,000 | 3.0% | $30,000 | $150,000 |
| $2,500,000 | 3.0% | $75,000 | $375,000 |
That five-year number is eye-opening, isn’t it? For a mid-sized MSP, that’s practically a new employee’s salary or a significant tech investment just vanishing into the ether. Seeing these numbers laid out makes it clear why this isn’t just a minor operational concern—it’s a significant business decision that impacts your long-term profitability.
Contract Considerations: Check Your MSA First
Before implementing any payment policy changes, there’s an important step you can’t skip—reviewing your existing client agreements.
Most MSPs operate under MSAs (Master Service Agreements) with their clients that specify payment terms. These agreements are binding contracts, and making unilateral changes to payment terms may create unnecessary friction or even legal issues.
Before making any changes, consult your attorney to review your current MSA language. They can help determine if your agreement allows for fee implementation or requires an amendment. In some cases, you might need to wait until contract renewal to update fee structures. This patience can pay dividends in preserving client relationships.
For future MSAs, draft clear language that explicitly addresses payment processing costs. A small investment in legal advice now can prevent major headaches later and provide a solid foundation for transparent client relationships going forward. Proper contract language also gives you flexibility to adapt as payment technologies and regulations evolve.
Implementation: Making the Switch Without the Drama
If you’ve been eating these costs and want to make a change, the transition deserves some care and planning. Abrupt changes tend to create resistance, while thoughtful implementation builds understanding.
The Communication Plan
Don’t just spring a new fee policy on your clients. Consider this more deliberate approach that respects the relationship you’ve built. Start by giving at least 60 days’ notice before implementing any change. This buffer allows clients time to adjust their expectations and processes.
When explaining the change, focus on the why, not just the what. A message like “This helps us maintain service levels without raising base rates” frames the change in terms of client benefit rather than your cost savings. Always highlight the savings option through ACH prominently as part of the communication.
For your largest or longest-standing clients, consider offering a transitional period. This special treatment acknowledges their value to your business while still moving toward your goal of more sustainable payment practices.
A thoughtfully crafted message might look like:
“Starting March 1st, we’re introducing two payment options to keep our core service rates stable: Standard payment by credit card with the processor’s 3% fee transparently passed through, or a 3% discount when paying by ACH direct debit. The choice is entirely yours, and we’re happy to help set up whichever method works best for your business.”
The Technical Setup
Your payment system needs to handle this gracefully to avoid technical hiccups that could undermine your careful messaging. Make sure your invoicing clearly separates the processing fee (if using the passthrough model) so clients can see exactly what’s being charged and why.
The ACH setup process should be dead simple for clients—the easier you make it, the more likely they are to choose this option. Provide good documentation with step-by-step instructions, eliminating any friction that might discourage them from making the switch.
Just as important, ensure your staff is thoroughly trained to explain the options without sounding salesy or defensive. The goal is to position this as a business decision that benefits everyone by keeping core service rates stable while offering clients more control over their payment costs.
Common Objections and How to Handle Them
You’ll inevitably get some pushback from clients when implementing any payment policy changes. Being prepared with thoughtful responses can turn potential conflicts into constructive conversations.
When clients say, “None of our other vendors charge this fee,” respond by explaining that many businesses simply build these costs into their base pricing. Your approach offers transparency so they can choose the most cost-effective option for their company instead of paying hidden costs.
If someone objects that “This feels like a price increase,” acknowledge their perspective while reframing: “We understand how it might seem that way, but we’re actually creating an opportunity for you to avoid these costs entirely through ACH payments, which wasn’t an option before.”
For clients who insist “We have to use credit cards for our accounting system,” show understanding: “We completely understand. Many of our clients use credit cards for the rewards and convenience. The fee transparency just helps everyone make informed decisions based on their priorities.”
These conversations give you an opportunity to deepen client relationships by demonstrating your commitment to transparency and fairness. Rather than defensive exchanges, they become discussions about shared business realities.
Looking Forward: The Changing Payment Landscape
The payment processing world is constantly evolving, and staying informed about emerging trends can help you position your MSP for future success.
Open Banking and Its Impact on B2B Payments
Open Banking initiatives are creating new opportunities for business payments. While primarily focused on consumer banking in the U.S., these regulatory and technological changes are beginning to influence B2B payments by enabling more secure, direct account-to-account transfers and reducing reliance on traditional payment networks and their associated fees.
New APIs allow for better integration between accounting systems and payment methods, creating a more seamless experience. For MSPs serving business clients, this means easier, less expensive ways to receive direct payments may be on the horizon, particularly for recurring service payments where the security and automation benefits of Open Banking are most valuable.
The Visa/Mastercard Settlement Effect
The recent $30 billion Visa/Mastercard antitrust settlement has significant implications for B2B service providers. Merchants can now more openly discuss payment options and associated costs with clients, and credit card networks must reduce fees for certain business categories.
The settlement has increased public awareness of processing fees, making client conversations easier and creating a more receptive environment for these discussions. Many B2B service businesses are now revisiting their payment policies in response, giving MSPs more leverage in explaining fee structures to clients.
B2B Payment Platform Evolution
New specialized payment platforms for B2B transactions are offering compelling alternatives specifically designed for recurring service businesses like MSPs. Platforms integrating with PSA tools like ConnectWise, Autotask, and Datto facilitate client-friendly payment policies, while solutions offering combined ACH and credit card processing with automated fee handling simplify administration.
PCI-compliant ACH platforms with built-in surcharge management reduce compliance costs by 37%, and new tools support selective fee application based on client size, payment history, and contract type. These platforms make implementing sophisticated payment strategies much more manageable for MSPs of all sizes, allowing for client-specific approaches rather than one-size-fits-all policies.
The Alternative Payments Way
When evaluating how to handle payment processing fees, having the right technology partner can make all the difference. Here’s how Alternative Payments approaches this challenge for MSPs:
Flexible Fee Handling Options
Alternative Payments provides MSPs with key options that align with the strategies we’ve discussed:
- Zero fees for ACH payments – MSPs receive 100% of every invoice paid via ACH, maximizing your margins on these transactions
- Transparent credit card processing – 2.9% for Visa, Mastercard, and Discover transactions; 3.5% for American Express
- Fee passthrough option – The ability to pass processing fees directly to customers (like Option 3 above)
- Selective fee absorption – The option to absorb fees specifically for clients on auto-pay (like Option 4), giving you control over when to waive fees
The platform focuses on the approaches that deliver the best balance of transparency and client satisfaction, while giving you the flexibility to make case-by-case decisions based on your business needs.
Streamlined Client Experience
Beyond fee management, Alternative Payments offers a comprehensive client payment portal that enhances the overall experience. Clients can log in to review current and historical invoices, update stored payment information, pay invoices, and set up auto-pay – all within a branded environment that extends your MSP’s professional presence.
This client-facing solution makes it easier to implement fee changes since clients have a clear, self-service platform where they can see exactly what they’re being charged and why.
End-to-End Automation
On the back end, Alternative Payments handles the entire payment lifecycle. The platform automatically marks invoices as paid in your accounting package and PSA, creates deposits for your payouts, and reconciles invoice payments to deposits – eliminating manual reconciliation and significantly reducing administrative overhead.
This automation is particularly valuable when implementing transparent fee structures, as it ensures accurate tracking and reporting without adding to your team’s workload.
Future-Proof Development
With an aggressive development roadmap and dedicated team, Alternative Payments continues to evolve alongside changing payment technologies and regulations. This ongoing development ensures MSPs have access to the latest payment options and compliance features without having to manage multiple systems or providers.
The focus on automating the entire accounts receivable journey aligns perfectly with the modern MSP’s need for operational efficiency and transparent client relationships.
So What Should You Do?
Our take? For MSPs serving business clients, the most ethical and financially sound approach is transparent fee passthroughs combined with meaningful ACH incentives. Show clients exactly what card processing costs, offer them a legitimate alternative to avoid those costs, and let them make an informed choice based on their own cash flow needs.
This isn’t just about payment processing—it’s about who you are as a B2B service provider. Do you hide costs, eat into your margins unnecessarily, or embrace transparency?
The choice is yours, but the B2B payment data (and your clients) seem to prefer clarity over cleverness, and your bottom line will thank you for not leaving thousands of dollars on the table year after year.
Alternative Payments helps MSPs set up transparent payment systems that maintain client trust while protecting your margins. Check us out at alternativepayments.io to learn more about our MSP-focused solutions.
