By Phil Nieto, President; Best CardThe COVID-19 pandemic is having an unprecedented impact on the entire economy—including the dental industry. It’s also affecting payment processing in a big way for dental practices.
Practices were hit swiftly and hard.
American Dental Association (ADA)’s Health Policy Institute has been conducting bi-weekly surveys from dentists throughout the pandemic. These show that almost every dental office was affected harshly from March until May of 2020. In April 2020, fewer than 1% of dental offices were open and experiencing full business as usual, which isn’t a surprise given the breadth and depth of state closures at the beginning of the pandemic.
Practices made a quick and strong—but not full—comeback.
There’s been a strong comeback in subsequent months. Unfortunately, while the rebound of the economy was substantial, the majority of offices report they’re still seeing fewer patients than prior to COVID-19. At the beginning of November 2020, 62.3% of offices were still experiencing lower patient volume than before the pandemic.1
Credit card use and acceptance seems more favored than ever since the COVID outbreak.
According to a study published in July by the Federal Reserve Bank of San Francisco, 28% of respondents reported specifically avoiding using cash to pay for in-person expenses, with 98% of those choosing to use debit or credit cards instead.2
Despite the exceptionally hard hit dentists took in Q2 of 2020, there’s been a swift and sharp rebound in credit card payments at their office—a recontinuance of a long trend. Information compiled from thousands of dental offices the last 11 years by Best Card (TDA Perks Program’s endorsed credit card processing company) consistently shows increasing credit-card acceptance at the average practice.
Interestingly, this resurgence in card acceptance appears to have outpaced the rebound of the dental industry itself.
Though the average dental office suffered a 74.3% decline in total processing volume in April 2020 compared with April 2019 ($8,054 and $31,312 respectively), the subsequent bounceback was almost as sharp. From June 2020 on, the average dental practice was accepting more in credit card payments than in the same months in 2019.
Similarly, the average number of credit-card transactions dental offices ran through 2020 shows the same trend: a steep decline in COVID-affected months followed by an increase over 2019 averages in ensuing months.
Indeed, since COVID re-openings, the average dental office is taking almost double the amount in credit cards than in 2009-2013.
Practices are also finding the safety benefits of contactless payments and web payments afforded by credit cards currently outweighs the added cost.
Practices are charging more post the COVID outbreak.
Something very interesting Best Card’s data shows is dental offices are charging more on average than they were prior to the pandemic. In five months—from May through September 2020—the average transaction size increased 4.43%. That’s almost as large a growth that occurred in the ten-year period from 2009–2019 (5.19%).
A variety of factors could be contributing to this: practices raising prices to account for increased expenses associated with PPE and more stringent disinfecting procedures between patients; reduction of non-emergency appointments (such as hygiene) while essential procedures continue, and more extensive treatments needed by patients who delayed appointments during the lockdown.
Lowering card-processing costs can save practices significant cash.
These factors combined mean your credit card processing costs will likely increase. When your business has an overhead factor that’s growing quickly—in this case, credit card processing—you need to make sure it’s in control and working for your bottom line.
Check your effective rate.
The effective rate is calculated by taking the total fees paid to your credit card processor and dividing that by the total amount processed in credit card sales. For example, an office that paid $978.24 to run $30,388 would have an effective rate of 3.22%. Based on more than 1,000 comparisons Best Card completed for dental offices in 2020, the average practice pays 3.26% to its processor. If your effective rate is above 2.5%, it may be worth looking at what you are paying to your processor. The average practice pays 2.23% through Best Card.
Ask patients for debit cards. Try to accept cards in person.
Debit cards, even processed without a PIN, run at drastically lower rates than rewards cards. And if the card isn’t present, it’s usually more costly to run. Some cards, like a virtual card from an insurance company, can have some of the highest processing fees, partly because they’re hand-keyed in. You can mitigate this by training your staff to ask for a debit card and try to accept cards in-person to get the lowest rates. You can also request your insurance providers send checks rather than virtual cards. As long as your processor charges reasonably, these steps can make a huge difference in your costs.
Know if your costs have gone up.
While there’s been small changes in base costs to run transactions instituted by card brands the last few years, in general, if your costs are increasing, it’s time to look at how you’re taking cards at the office and what you’re paying your processor. On the interchange plus (aka “cost plus”) pricing Best Card offers TDA members, there’s never been an increase in the company’s 13-year history.
Understanding your credit card processing costs can seem daunting, but at a time of tighter margins, dental offices accepting a higher portion of payments via credit cards need to know where costs can easily be lowered.
1 Vujicic, Marko. “COVID-19 Economic Impact – Survey Results.” COVID-19 Economic Impact on Dental Practices – Survey Results, American Dental Association Health Policy Institute, 2020, www.ada.org/en/science-research/health-policy-institute/covid-19-dentists-economic-impact/survey-results.
2Laura Kim, Raynil Kumar. “Consumer Payments and the COVID-19 Pandemic: A Supplement to the 2020 Findings from the Diary of Consumer Payment Choice.” Federal Reserve Bank of San Francisco, Federal Reserve Bank of San Francisco, 31 July 2020, www.frbsf.org/cash/publications/fed-notes/2020/july/consumer-payments-covid-19-pandemic-2020-diary-consumer-payment-choice-supplement/.