Editor's note: Surcharging and questions about whether to pass along credit card fees to patients is a current hot topic. With that in mind, I sat down with Emily Edwards, director of Strategic Growth for Verisave, a company that calls itself, "a cost-reduction firm specializing in credit card processing fees and merchant account consulting."
Q: Are credit card processing fees a cost of doing business, or should they be passed on to customers?
A: Great question! Passing these fees to the customer or patient (also known as surcharging) can certainly help offset costs, but it's more complex than most people realize. First, it's going to depend on your market. You know your business better than anyone. The key question is will adding a surcharge push my customers to look elsewhere? If not, surcharging can be a solid option, as long as it's approached carefully.
As you move deeper into the world of surcharging, you may find it gets tricky, specifically when it comes to compliance. Card brands and certain state laws have strict rules. You need clear signage, the surcharge must be a separate line item, and you can't charge more than your actual processing costs. A full list of regulations is on our website.
While it can be a cost benefit, keep in mind that surcharging the wrong way is risky and can even cost you your merchant account. But if it's done correctly, with the right technology and guidance, it's a legitimate way to reduce costs. Regardless of your approach, we always suggest ensuring your processing fees are as low as possible. That way, whether you absorb them or pass them on, the impact is minimized.
Q: How can a practice check if surcharging is legal in their state?
A: Some states have entirely banned surcharging, while others have specific restrictions, so it's best to check with legal counsel before implementing any surcharging program.
Q: Can you add a surcharge to debit card transactions?
A: No. Surcharging debit cards is not allowed.
Q: What about offering a cash discount?
A: This is a very common question. Whether you call it a cash discount or a surcharge, the same rules apply and the terminology doesn't change the regulations.
Q: Should dental practices raise their fees in addition to adding surcharges?
A: This depends on whether raising prices would put you in a noncompetitive position. Credit card usage is only increasing, so any business should evaluate surcharging the same way they would any other price adjustment.
Q: Are dental practices justified in surcharging since so many other businesses are doing it?
A: While consumers are growing more accustomed to surcharging, they do not like "hidden fees." They want to know what they're being charged and why. Our best advice is to be upfront and clear if you begin surcharging. In fact, being transparent is absolutely required by the surcharging rules. If you communicate clearly and follow compliance guidelines, patients are more likely to be understanding.
Q: Are there other ways to offset credit card processing costs aside from surcharging?
A: Absolutely. Businesses pay $138 billion annually in processing fees, and $25 to 40 billion of that comes from errors and overcharging. That's why it's worth reviewing these costs for potential savings. Working with a payment solutions expert can help.
It can definitely get complex, and I'm always happy to talk through the nuances with doctors or office managers. There's a lot to it, and for my team at Verisave, this is our main focus. Bottom line: To tackle this issue properly, you either need deep knowledge of the intricate processing rules, which can be hard for any business to master, or you need to seek expert advice.
Q: Is it even worthwhile to optimize processing fees if you're just going to pass those fees along to the patient via surcharging?
A: The two approaches actually go hand in hand. Surcharging shifts the burden of credit card processing fees to the customer, but from a competitive standpoint, it benefits the business to ensure these fees are as low as possible.
Merchant account optimization focuses on reducing those fees at the source. It involves adjustments to the backend of the account settings without disrupting your current setup. The process identifies unnecessary charges, overages, and errors that result in higher processing fees.
The result is eliminating significant wasted spend. For businesses that want to explore surcharging, I always recommend first ensuring their processing fees are optimized so they're not passing inflated costs onto their customers.
The comments and observations expressed herein do not necessarily reflect the opinions of DrBicuspid.com, nor should they be construed as an endorsement or admonishment of any particular idea, vendor, or organization.
