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ABC’S of Credit Card Processing

If you’ve looked at your monthly bills, you know that credit card processing fees can be complicated, hard to understand, and unnecessarily expensive. It doesn’t have to be this way!

With just a little bit of information, you’ll be able to understand where the costs come from and what they should be.

What Should it Cost?

         Rather than look at any individual card (which is how many companies will try to claim low costs) it’s best to look at your overall effective rate; take the total amount paid in all rates and fees and divide that by the total amount run in sales for the month. Example: $420 in fees ÷ $20,000 processed = 0.021, or 2.1%. Best Card’s average dental office pays an effective rate of 2.1%, which means they pay just $2.10 to process $100 in sales.

Understanding the Basics

Anytime you run a card there is an exact fee that has to be paid to the card brands depending on the type of card run (the system automatically detects the card type) and the method in which the payment was run. This cost is known as Interchange and this is the direct cost that any credit card processor has to pay; there are more than 1,200 different cards, each with their own Interchange cost. In this way all processors have the same “price floor.” It is what is charged on top of this where processing companies compete. That said, there are specific things that you can do in the office to minimize your Interchange costs and save additional money, including:

  • Have your staff ask for debit cards. Debit cards are far cheaper than credit cards to run (there’s no risk to the card company that the cardholder won’t pay their monthly bill and there are no perks/rewards to pay). Debit cards can cost a fraction of credit card fees.
  • Swipe the card or use the chip for the lowest rates rather than hand-keying in the card number. If the card is present, there is a lower risk of fraud which results in the lowest possible interchange cost on any type of card processed.
    • When you must process card-not-present transactions (keyed cards), make sure to enter the street address and zip code associated with the card to avoid additional fees and get a slightly lower rate.
  • Get PCI compliant! The PCI Security Council mandates annual completion of a self-assessment questionnaire (SAQ), and quarterly network scans if using ethernet/online connectivity. Best Card maintains >90% compliance as we send emails and assist in getting merchants compliant. We prepare thousands of cost comparisons and see processors charge $18.95-$39+ per month in non-compliance fees on approximately 70% of analysis requests, and this is what the industry as a whole is reporting. Get compliant!

What are these Other Costs?

         In addition to the Interchange costs, there are also Card Brand Fees, which are many small fees charged directly by the card brands for access to their networks (Dues and Assessments, FANF, data kilobyte usage, etc). While all processors pay those same fees, many processors surcharge above the actual cost. Best Card passes them through exactly at cost.

         Just because all credit card processors have the same costs doesn’t mean that they charge their customers the same price for their services. There are a few popular pricing models:

  • lInterchange Plus: Pass through all card costs with a fixed surcharge percentage (and sometimes a per-transaction fee). We are seeing more processors (especially those with autopost of payments into dental software) add additional surcharges to some or all cards to boost their profit. Best Card offers any endorsing association member Interchange + 0.30% + $0 per transaction, which is significantly below the industry average.
  • lTiered: Group all cards into 3-6 “tiers” based on similarly priced cards. Some processors may have a base rate and surcharge for “Non-Qualified” cards that have higher Interchange costs. If you see Qualified, Mid-Qualified, or Non-Qualified on your statement, you’re likely on Tiered pricing.
  • lFlat rate: Charge one fee for all cards, or sometimes a card present fee and a more expensive card-not-present fee. These rates can be very high because they have to make sure the processor isn’t losing money if there are many transactions with higher cost cards.
  • lConvenience Fee: While there are a couple variations, this includes having your patients pay the fee for accepting cards, generally at very high rates well above your normal cost. This not only has extensive reporting requirements with the card brands, but some states (including Colorado) do not allow passing a surcharge onto the customer and patients tend to respond negatively.

Which One is Best?

While any pricing method can be competitive, Interchange and Tiered are usually the most competitive pricing methods, assuming you have an ethical processor. If your processor is looking for ways to boost their profit at your expense, then any system might be more to their benefit than yours.

It’s About Who You Work With!

         Best Card is endorsed by 25 state dental associations for credit card processing because they offer exclusive rates for members, have excellent customer service, and are committed to keeping costs low for dental offices. On the rates that Best Card guarantees to all association members, the average dental office saves $2,468 (24%) a year. They also have software options that can automatically post payments into most popular dental software. If you’d like to see what they can save your practice, email a recent statement to CompareRates@BestCardTeam.com or fax it to them at 866-717-7247. Questions? They’d love to answer your questions so feel free to call them toll free at 877-739-3952 or visit www.BestCardTeam.com.

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