Credit Card Payments and Law Firm Trust Accounts: What Attorneys Should Know

Clients expect to be able to pay by credit card, and accepting cards can help a law firm get paid faster. But when card payments involve a trust account, the details matter. Processing fees, chargebacks, and the way deposits are routed can all create trust accounting problems if the firm’s payment setup is not designed for law firms.

Here is what attorneys and their bookkeepers should understand before accepting credit card payments for retainers, advance costs, or earned fees.

Can a Law Firm Accept Credit Card Payments?

Yes. Accepting credit cards for legal fees is a widely accepted practice. The challenge is not whether a firm can take cards, but how it handles the money once a payment is made.

The key principle is the same one that applies to every other trust deposit: money that belongs to the client must go into trust, and money that belongs to the firm must go into operating.

Why Do Credit Card Payments Create Trust Account Issues?

Standard merchant processing accounts are built for ordinary businesses. They often work in ways that conflict with trust accounting rules.

Fees deducted from the deposit

Many processors subtract their fee from each transaction before depositing the money. If a client pays a $5,000 retainer and only $4,850 reaches the trust account, the client’s ledger and the bank balance will not agree. The client is entitled to have the full amount credited to their trust balance.

Fees withdrawn from the trust account

Some processors take monthly fees directly from the linked bank account. If that account is the trust account, the firm is effectively paying its own business expenses with money held for clients.

Chargebacks

If a client disputes a charge, the processor may pull the money back. If that withdrawal comes out of the trust account, it may reduce funds that belong to other clients.

Earned and unearned payments mixed together

If all card payments flow into one account, earned fees may end up in trust or unearned retainers may end up in operating.

How Should Credit Card Fees Be Handled?

Processing fees are a cost of doing business for the firm and should be paid from the operating account, not from client funds.

The cleanest approach is to use a processor designed for law firms that:

• Deposits the full payment amount into the trust account
• Charges all processing fees to the operating account
• Takes chargebacks and refunds from the operating account rather than trust
• Separates trust payments from operating payments

Legal-specific payment platforms such as LawPay and Clio Payments are designed with these requirements in mind. Even so, the firm should confirm how its account is configured rather than assume it was set up correctly.

Florida’s trust account rules permit a lawyer to keep a limited amount of the lawyer’s own funds in the trust account to cover bank charges. Florida Bar guidance has also indicated that card discount fees and service charges should be charged to the firm’s own ledger rather than to clients. Any such funds should be tracked on a separate firm ledger, and firms should review the current rules before relying on this approach.

Should a Law Firm Have Two Merchant Accounts?

Many firms use two separate payment links or merchant accounts: one connected to the trust account for retainers and advance costs, and one connected to the operating account for payments on invoices that have already been earned.

This setup makes it much easier to send each payment to the right place from the start. It also reduces the need to move money between accounts after the fact.

What Happens if a Client Disputes a Charge?

A chargeback should never leave other clients’ funds short. If the processor withdraws a disputed amount from trust, the firm may need to replace the money from its own funds right away so that no other client’s balance is affected.

In Florida, a lawyer who deposits personal funds to cover a trust account shortage must also promptly notify The Florida Bar’s lawyer regulation department of the shortage, its cause, and the replenishment. That is one more reason to make sure chargebacks are taken from operating instead.

Every chargeback should be documented and recorded on the correct client ledger.

Can Firms Pass Card Fees to Clients?

Some firms want to add a surcharge or convenience fee to cover processing costs. Whether this is allowed depends on the applicable ethics rules, card network rules, and state law. If a firm chooses to do this, the charge should be disclosed to the client in advance and should not exceed the actual cost of processing. Attorneys should review the rules before adding any surcharge.

Bookkeeping Checklist for Credit Card Payments

• Confirm which bank account each payment link deposits into.
• Verify that trust deposits arrive in the full amount paid.
• Confirm that processing fees are charged to operating.
• Confirm that chargebacks and refunds are taken from operating.
• Record each card payment on the correct client ledger.
• Match processor reports to bank deposits every month.
• Include card activity in the monthly three-way reconciliation.

Get Help With Trust-Compliant Payment Processing

A&W Associates helps law firms in Wesley Chapel, Tampa, and throughout the Tampa Bay area keep credit card payments, trust deposits, and operating account activity properly separated and reconciled. We can review how your payment system is set up and make sure card activity is recorded correctly in your books.

Contact A&W Associates to learn more about our law firm bookkeeping and trust accounting services.

This article is provided for general informational purposes and does not constitute legal advice. Attorneys should review the trust accounting rules applicable to their jurisdiction and consult appropriate legal or ethics counsel when necessary.