Agency owners frequently ask me: “Should my agency accept credit cards?” (And then they grumble about the ~3% merchant fee.)
My answer? In general—yes, accept credit cards… and don’t charge your clients a surcharge.
“Should” is a strong word. Let’s look at how to apply this at your agency. You ultimately want to balance profit margins and client convenience.
Why to accept credit cards at your agency
Why accept credit cards? It gets you paid faster, without the physical and emotional overhead. (For instance, no more: “Have they paid yet?” or “When can I get to the bank for the deposit?”)
Apart from year-end pre-payments, I get 90-95% of my revenue via credit card payments. This means fewer trips to the post office or bank (checks are usually larger than my bank’s mobile deposit maximum), and less wondering when someone’s going to pay.
Tired of waiting for Procurement to pay? Enterprise clients can pay a Paid Discovery fee from a “PCard” (their company credit card), whereas it might take weeks or months to issue a purchase order. You can start faster and get paid, instead of caving to client pressure while waiting for the first PO. Recently, a speaking client asked to pay a $2,500 deposit via her credit card to avoid accounting delays at her end.
My clients enjoy card benefits, like miles or rewards points, at no additional charge to them. Don’t discount that temptation—I know I tend to spend more when I think about getting miles or points; it gives people an emotional reason to rationalize a large purchase. (I assume, of course, that you’re only charging people for things they need for their business.)
Auto-bill = No late payments
Some of my clients spend way too much time, energy, and angst chasing late payments. Some of this is about expectations management and invoice reminders—but it’s ultimately the worst part of invoices. When you invoice a client, they decide if and when they’ll pay.
Yet with credit cards, you can set up an auto-billing agreement. Credit card auto-billing means late payments have disappeared for my recurring clients. I now have all but one coaching client on auto-bill. (The other pays via bank ACH.)
I no longer wonder when a recurring client will pay their invoice, because they’ve pre-authorized the charges, and I schedule the auto-bill accordingly in QBO. (I typically invoice consulting clients, who pay Net 7 after pre-paying a 50% deposit, sometimes via check.)
You can’t do auto-billing for a client who pays a different amount each month, but it’s perfect for flat-fee retainers. (It still requires some administrative management—including getting a signed authorization from each client, and adjusting dates if timeframes change—but it’s a lot less than before.)
Theoretically, clients might do chargebacks (where they dispute the charge), but it’s never happened to me, and I haven’t heard that as a common problem.
Why you should “eat” the credit card fee
Why skip charging a credit card surcharge? Because in the U.S., it’s associated with rigid retailers (imagine the convenience store with the $5 minimum) or struggling mom & pop businesses (where it comes across that they really really really need that 3%).
Charging a surcharge says to clients, “I’m cheap, and this 3% is more important to me than the 97% I’m keeping.” It makes clients think more carefully about what they’re paying, and may [eventually] create avoidable client retention risks for you.
If you can’t afford 3%, you have a larger problem with agency-wide profitability, and you should fix that. I see credit card fees as a “cost of doing business.” (In my case, I budget a conservative 4% annually toward merchant fees; last year, it averaged 2.8% of my revenue.)
Are you on the fence about taking American Express, with their higher fees? Do it! Amex customers tend to spend more. I see a version of that in my business—Amex has a ~25% market share, yet ~40% of my coaching clients choose Amex for their auto-bill card. New clients often mention they like that they can get rewards points for paying my fees.
Realistically, you don’t want to take 100% of your revenue via credit card, especially as you continue to grow. (For instance, 3% of $10 million is $300,000.) And you probably won’t—most agencies still get most of their revenue via check.
How to accept credit cards
You have a few options. The simplest is to use an approach that integrates with your existing invoicing system.
Occasional Credit Card Payments: If credit card payments are occasional for your client base, PayPal makes sense. There are simpler and cheaper options, but you probably already have a PayPal account. (They have an auto-bill feature, but I’ve found it inflexible and a hassle to use.)
Frequent Credit Card Payments: If you take frequent payments via card, consider a merchant account linked directly to your accounting system. I use Intuit’s merchant processing services, within QuickBooks Online. Not necessarily the cheapest option—I’m sure someone else would charge a fraction of a percent less—but convenient, and less admin overheard for me and my team.
High-Volume Credit Card Payments: You should negotiate with a specialist merchant processor. You also likely need to assign more accounting time to reconcile everything.
Top Takeaways: Speed, Satisfaction, and Ease
I recommend accepting credit cards. Ultimately, accepting credit cards benefits you with faster payment speed, increased client satisfaction, and reduced administrative overhead. Unless your national norm is to charge a surcharge (e.g., Australia), don’t pass the merchant fee to clients unless you want to seem greedy.
Question: Do you accept credit cards at your agency?