Cutting Practice Costs for Credit and Debit Card Processing

The following article was published in the Atlanta Hospital News in November, 2008 By Jeffry M. Finkel Is your medical practice paying too much in merchant processing costs for accepting patient credit and debit cards! It’s amazing how many practices overpay hundreds, even thousands, of dollars annually in processing and equipment costs. How costly is the problem? If your practice accepts, for example, $100,000 annually in credit/debit card payments and pays an effective rate (includes discount rate, transaction fee, and all extra fees) of 4.5% rather than 2.5%, you could be overpaying $2,000 annually. A practice accepting $500,000 annually could be overpaying $10,000 annually. Saving those extra dollars could buy new medical equipment or help pay for a physician’s vacation. Understanding credit card processing is extremely challenging. Fee schedules are complicated. Rates can increase without notice. Monthly statements often are nearly impossible to interpret. Actual monthly costs are rarely as low as projected when you signed your agreement. And proposals from multiple processors are difficult to compare. Why are costs higher than necessary? Two major factors contribute to higher costs: Your contracted fee schedule is too high. Improper handling of transactions by practice staff generates unnecessary additional cost (e.g., not “settling” the transactions daily). How knowledgeable are you about controlling processing costs? Can you answer the following questions about your processing service? “What is our effective rate vs. our discount rate?” “Do we lease or own our credit card terminal?” “Are we under contract or can we switch processors?” “Does using a pin pad actually save us money?” “How much do I pay in interchange fees?” If you can answer these basic questions, your practice is doing a better job of controlling processing costs than most. But whether you are a novice or are experienced in dealing with processing costs, read on for help in lowering costs. How processing fees are incurred: Processors offer a range of pricing models – some are better than others. One processor may simply charge a “discount fee” plus a “transaction fee” – that is, a percentage of each sale (e.g., 1.89%) plus a set fee per sale (e.g., $.20). Another may offer a bundled rate (e.g., 2.1% to cover both fees). While another may use a “cost-plus” model which may offer the best rate. “Discount fees” can vary dramatically among processors and are based on many factors including: Is the credit card slid through the terminal or does the staff hand-key the card number into the terminal? What type of card is the patient using (e.g., consumer, airline points, rewards, “cash back” or business)? Is a pin pad used in conjunction with a debit card (i.e., the money is debited from the patient’s checking account rather than accruing to the credit card balance)? In addition to “discount” and transaction fees, practices may incur numerous other monthly and annual fees including statement fee, monthly minimum, authorization, and third-party fees). The list is long and varied, and the fee structure is difficult to explain even for credit card industry personnel. Some key tips for lowering your processing costs: Learn how to read and analyze your monthly statement. Ensure that you are being billed correctly according to your agreement. Negotiate with your processor for better rates. Obtain competitive proposals. Consider processors endorsed by medical and professional associations. Choose a processor known for delivering excellent customer service. Ask other practices for recommendations. Teach your staff to correctly handle credit/debit card transactions to minimize costs. Slide cards rather than hand-key card numbers whenever possible. Always enter any address information requested using the patients billing address. Purchase rather than lease terminals and printers. Eliminate terminal insurance. Always settle batches the same day transactions are performed. Analyze your transactions to determine if using a pin pad with debit cards will lower your costs. Take action now and implement the tips listed above to reduce your costs. View additional money-saving tips at www.OverheadReductionServices.com. Jeffry Finkel is the President and owner of Overhead Reduction Services. Jeff may be reached at 404 995-9112 or Jeff@OverheadReductionServices.com.