Lawyers taking credit cards – read this – put this in your fee agreement.
Credit cards can be all kinds of good for you and your clients. They may allow your client to come up with a retainer that may otherwise be difficult for them to do. It may allow them to pay more quickly. It may net your clients some Chase Ultimate Rewards Points. There are many, many, reasons from convenience to expedience to take credit cards.
At some point along your journey you will be hit with a chargeback. Chargeback is the ultimate 4 letter word.
You won’t have done anything wrong. Yet a decent chunk of change will come flying out of your operating account.
Resolving a chargeback takes many hours. Way too many hours. For purposes of this post, just know that a chargeback can happen even when you take every precaution.
If you are accepting credit cards, it is essential that your fee agreements contain language that says you will only refund money on the card that you were paid on.
Imagine a client gives you a $10,000 retainer. You’ve set up everything properly so the $10,000 goes into your client funds account and the fees come out of your operating funds account. The client then cancels the card the paid the retainer on. The client then fires you. You go to refund the money on the card but you can’t but it is closed. Your client insists on being paid immediately. You cut the client a check from Client’s funds. The client then makes a chargeback instantly resulting in $10,000 out of your operating funds. This is the way it happens. Without warning. Without anything the money is ripped from your account until the dispute is resolved.
This could happen. You could be left holding the bag.
It is possible to have the a chargeback 4 months after a charge.
You can dispute the chargeback. It can take months to resolve. In the meantime, you are out $10,000. You can show the credit card company your check. You can stand on your head. Good luck talking to a person.
You do not want to be in this position. Not for a second. Save yourself a headache and insist on refunding directly to the card so there’s no issue with the credit card company. Write this down. Put this in your fee agreements.