By Phil Nieto, President; Best CardDo you know what it costs to accept credit cards at your practice? Most dentists have other things on their mind than the minutiae of processing fees. However, because the last ten years have seen the volume of credit card transactions at dental practices almost double, attention to those details can make a huge difference to your bottom line.
The real costs of running a patient’s card
Every time a business runs a credit card, there’s a direct cost set by the card issuer. It’s identical for every credit-card processing company and known as the interchange rate. Because it’s a hard cost for all processors, this is the minimum that can be charged on a transaction without a credit card processor losing money.
Interchange rates vary immensely. For example, debit cards are almost always cheaper to run than credit cards, even when processed without a PIN. Reward cards are usually more expensive than regular credit cards. Similarly, card-present transactions (when you accept the card via chip, swipe, and even contactless methods such as cards saved on a smart phone) will get the lowest rate for that type of card. That same card manually keyed (i.e., a patient provides the number over the phone or makes a website payment) generally runs at a slightly higher rate due to the increased risk of fraud.
Visa and Mastercard postponed their largest rate increase(s) in years. Did your processor raise rates anyway?
Every April and October, the card brands (Visa, Mastercard, Discover, and American Express) make adjustments to the rates that are paid by all businesses to run cards. While these changes are usually very small, the April 2021 changes were slated to be some of the largest increases in the last 10+ years. Fortunately, pressure from Congress and COVID-impacted businesses persuaded the card brands to delay most increases until April 2022.
Though many rate increases were postponed, this doesn’t mean your costs won’t increase. First, not all processors pass through costs directly, and it can be difficult to determine which fees are legitimate and which increase their profit margins. Second, since rate and fee increases usually must be communicated 30 days in advance, many processors initiated and notified customers of rate increases before the card brands decided to delay interchange rate increases.
The majority of card-processor statements Best Card reviewed in March for dental offices included notices of rate increases. Many companies will move forward with the increases and pocket the extra fees they were going to have to pay the credit card companies. On top of this—even without the card-brand fee increases—many processors raise rates several times per year. A good deal you received a few years ago may not be so great now.
How to minimize costs when accepting card payments
1. Do the math.
Statements can be difficult to decipher, but calculating your effective rate will quickly show you what you’re actually paying to accept credit cards. Grab a recent credit card processing statement, and quickly calculate your effective rate using this simple formula:
Fees ÷ Dollars Processed = Effective Rate.
For example, if you paid $1,032.54 in total fees on $30,456.70 in credit card sales, your effective rate would be $1,032.54 ÷ $30,456.70 = 3.39%
Best Card analyzes more than 1,000 processor statements each year for dental offices. Currently, most practices are paying over 3% to run their cards. (The average practice using Best Card pays 2.18%.) Your effective rate will vary monthly, based on the types of cards you accept and how you accept them, but if you’re regularly paying more than 2.20%, it’s definitely worth taking a look at what your processor is charging.
2. Know the steps to lowering your credit card processing costs.
Best Card published 7 rules dental offices should follow to keep their processing rates down. These tips target lowering your interchange costs on transactions. If your processor doesn’t have you on pricing that lets you benefit from those lower costs, it’s worth seeing if you can get better rates.