5 ways to help your practice reduce credit card processing fees

Matt Rej offers tips on how to mitigate the costs of accepting credit cards

Credit cards are convenient for patients and medical practices alike. It’s easy for dentists and specialists to collect payments immediately following an appointment in a way that their patients prefer. This helps keep accounts receivables low and simplifies the medical billing process.

While there’s no debating the convenience of card payments, many practices overlook the credit card processing fees eating into their bottom lines. Dental and specialty practices pay upwards of $7,500 to $12,000 or more on processing fees alone. These costs are often accepted at face value and typically rise over time.

The vast majority of medical practices can save money on credit card processing without switching processors or changing anything. There are five proven ways to reduce processing fees that can potentially save dentists and specialists tens of thousands each year.

1. Audit your statements

Take a look at your last three credit card statements. Credit card processors are notorious for adding extra fees and inflating bills in the hopes that these charges go overlooked. Line items for terminal fees, AVS fees, PCI compliance fees, IRS reporting fees, terminal fees, and gateway fees are all examples of inflated markups that don’t need to be included on the bill. Identifying and removing these unnecessary charges can instantly save you $2,500 to $4,000 annually.

Beyond the extra charges, look for any inconsistencies from one statement to the next. If the statements are confusing and deceptive, there’s a chance your processor is trying to bury other hidden markups on your statements. It’s suspicious if the fees aren’t presented in a way that’s clear, logical, and easy to understand.

2. Assess your contract

Review the merchant agreement that you signed to start accepting credit cards. It’s a little bit easier to negotiate fees if the contract is nearing its expiration date. Processors don’t want to lose your business. They make money every single time a card is swiped, dipped, or tapped at your practice. Leveraging your contract expiration is a highly effective way to lower your fees.

It’s also worth comparing your contract terms against the statements you’ve audited. Some processors breach contracts by increasing rates or adding fees that weren’t part of the initial agreement. If your processor breached those terms, you’re entitled to compensation in the form of a refund for those overages.

3. Negotiate and push back

There are three components of credit card processing: interchange, assessments, and markups. Interchange fees and assessments are imposed at the card network level by Visa, Mastercard, Discover, and American Express. These are non-negotiable rates that must be paid to the card brand each time one of those cards gets used as a payment. Markups are charged by the processor, and those rates are completely negotiable.

It’s easier to negotiate these rates if you’re on an “interchange plus” pricing plan. This means that you pay the card network’s interchange “plus” the markups imposed by your processor. Everything other than the interchange fees and assessments can be negotiated. While processors are entitled to some fees for their role in facilitating the transaction, some of these markups are egregious and can often be cut in half.

While there’s no debating the convenience of card payments, many practices overlook the credit card processing fees eating into their bottom lines.

4. Don’t switch processors

It’s a common misconception that switching processors will help save money on credit card processing. In reality, it’s usually more expensive. New processors will often ask to see what you’re currently paying and then undercut those rates to make their services seem more appealing. But then they inflate the processing rates by adding other markups to your statements. After a year or two, they’ll increase your rates, and you’ll end up paying more than you were with your old processor.

You’re much better off sticking with your current processor and just negotiating directly with them. If you aren’t getting anywhere in your negotiations, you can work directly with a merchant consultant to handle those conversations on your behalf. There’s no risk in going this route, as cost reduction firms aren’t compensated unless you save money.

5. Continue monitoring each statement

Even after you’ve successfully negotiated a reduction, you still need to make sure your statements have been adjusted appropriately. Unfortunately, many processors use deceptive tactics when dealing with merchants. So you can’t always take the word of a sales rep or customer service agent who promised a lower fee. Get everything in writing, and make sure those new rates are reflected on your next statement.

Furthermore, make sure that new hidden fees haven’t been added in place of the ones that were removed. Monthly monitoring is really the way to ensure that your negotiations have paid off, and it should be obvious that your total costs to process payments are lower. Rather than looking at just the fees, it’s often easier to calculate your “effective rate” as a more accurate representation of your average processing fees.¹ This is a simple formula. Just divide the total amount that was deducted each month for processing by your total monthly sales. If this rate is higher or remains unchanged after your negotiations, then your processor is still doing something deceptive behind the scenes, and there’s more room to save money.