Credit Card Processing Costs Increasing? Here’s What You Can Do to Lower Them.

2009 was one of the worst years for the economy in recent memory. The economy declined by 2.4%. The average dental office was hit by a 3.68% decline in credit card processing volume from the previous year.[1]

Following the Great Recession, the dental industry has failed to recuperate as well as the economy as a whole has, per a 2014 ADA study.[ii] When adjusted for inflation, the net income of the average dental practitioner through 2013 had fallen by almost $9,542 since 2009. This is a decrease of 5.01% from 2009 to 2013. There are many speculated reasons for this decline, including lower demand for dental services combined with more practitioners entering the field.

Patients are increasingly using credit cards.

TDA Perks Program’s endorsed credit card processor, Best Card, compiled years’ worth of financial data that indicates that while national dentistry growth after 2009 has been problematic, the percentage of payments made using credit cards has risen sharply.

Here’s what the increase in credit card usage looked like for TDA members—and what the important takeaways are for you.

Average Dollar Amount Processed

In 2009, the monthly-average dollar amount processed on credit cards was $16,034. Compare that to $27,223 in 2016. This is a growth of 69.8% in the average credit card volume for TDA practices between 2009 and 2016.

The lack of growth in the dental industry indicates that this growth is due to more patients paying for treatment using credit cards. There are many potential reasons for this, from evolving patient choice in payment methods, to changes in the coverage and availability of patient insurance. But the trend is clear.

Average Transaction Amount

For TDA-member offices, the average transaction amount increased by a small amount—compared to the overall growth of card volumes. In 2009, during the depths of the Great Recession, the average transaction for a Texas dentist was $236.29. In 2016, it was $257.10.

This represents an increase of 8.81% in the average transaction amount over 7 years of data. While statistically significant, this increase hasn’t affected the growth of monthly volumes nearly as much as the average number of transactions per month.

Average Number of Transactions

The single largest increase that’s driven the growth of the credit card processing volume at TDA-member practices is in the average number of transactions.

In 2009, the average TDA-member practice ran 68 credit card transactions per month. In 2016, the average was 106. This is an increase of 56% in the average monthly credit card transactions processed, which is a staggering increase over a 7 year period.

Needless to say, when a sector of your business grows by 69.8%, you need to take a very close look to ensure that these changes don’t negatively impact your bottom line.

Tips for Getting the Best Deal on Credit Card Processing

Heeding the following tips will help you get the best deal possible in this growing part of your business—no matter who your credit card processor is.

Check your effective rate—regularly.

The effective rate can be calculated by dividing the total amount you paid to your processor (all rates and fees) by the total dollars ran in credit card charges. (Best Card’s average Texas practice pays an effective rate of 2.14%.) A quick review of your credit card processing service provider could save you thousands of dollars per year.

Credit card processors have the ability to raise rates from what is on your signed contract, as long as they give you advance notice. This notification could be hidden in your monthly statement. Many processors will raise the rates on your cards as often as every couple of months, so make sure to check your effective rate regularly.

Watch out for the early-termination fee, long-term leases.

Many processors attach an expensive early termination fee to their contracts, as well as expensive long-term leases for credit-card processing equipment. This means they can raise rates at will, because they can make it too expensive to leave them. This is why we always recommend asking what the early termination fee is—unambiguously in writing. Furthermore, a lease will generally cost you 4 to 20 times more than the value of the equipment, if you were to buy it outright.

Encourage patients to use debit cards.

To lower your effective rate, try to take as many debit cards as possible. And if insurance carriers will cooperate, try to accept insurance payments via check or ACH instead of credit cards. (We often see these card rates run at highest costs.)

The Durbin Amendment to the Dodd-Frank Act of 2011 lowered the cost of debit cards for all credit card processors. Your processor should offer significantly lower rates on debit cards than credit cards, even without entering a PIN number. If it doesn’t, you need to contact it to make sure you aren’t overpaying. With much lower debit cost, even a simple step like getting your staff to ask patients if they have a debit card they’d like to pay with can lead to significant monthly savings.

Lastly, cards accepted in person (swiped or dipped using the chip) not only run at a lower cost, it also gives you a much stronger position in case of a chargeback issued by the patient. If possible, always try to accept payment at the time of treatment. If a payment is later keyed in due to the card or patient not being present, always put in the address, zip code and 3-digit security code on the back of the card to ensure the lowest possible rates and strongest possible chargeback position on keyed cards.

[i] Jennifer Nieto. “How is the Economy Affecting your Dental Practice” TDA.org. Q1 Journal 2010.

[ii] Bradley Munson, BA & Marko Vujicic Ph.D. “Dentist Earnings Not Recovering with Economic Growth” ADA.org. Health Policy Institute Brief. December, 2014.