Managing a dental practice involves more than just excellent patient care. It also means controlling your expenses, including credit card processing fees that often go unnoticed. Surprisingly, these fees can quickly add up, eating into the funds you might otherwise invest in new equipment, staff, or other vital aspects of your business.

That’s why handling your dental card processing costs is crucial. A few clever tweaks can make a significant difference, allowing you to retain more earnings to improve your practice and enhance the quality of care you provide to your patients.

In this article, we’ll explain why credit card processing can be costly and offer practical advice on reducing processing fees to lower these expenses. Whether setting up a new practice or fine-tuning your existing operations, our tips will help you reduce credit card fees effectively.

How Do Credit Card Payments Work in Your Dental Practice?

When you process a credit card payment at your dental practice, several entities work behind the scenes to ensure the transaction is completed smoothly. Each player has a specific role and takes a small portion of the transaction fees for their services. Here’s a look at it:

• Merchant Account Provider

Think of this as your entryway to accepting credit card payments. They provide you with a merchant account, which temporarily holds the funds from credit card transactions before transferring them to your bank account.

• Payment Processor

The payment processor acts as the middleman, managing the communication between your office and the bank that issued the customer’s credit card. It handles the technical steps, like authorizing the payment and ensuring the funds are settled into your account.

• Card Networks

Major card networks like Visa, MasterCard, American Express, and Discover make the transfer of funds possible. They connect the customer’s bank and your merchant bank, set the interchange fees, and establish the rules for processing transactions.

• Issuing Bank

This is the bank that gave your customer their credit card. It’s responsible for approving the payment and ensuring enough credit or funds to cover the transaction.

How Do the Transactions Flow?

When a patient pays with a credit card, several steps happen behind the scenes to complete the transaction. Here’s a simple breakdown of the process:

• Transaction Initiation: It starts when your patient swipes, taps, or enters their credit card details through your office’s payment system.
• Authorization Request: Your payment processor sends a request to the card network (like Visa or MasterCard), which then forwards it to the patient’s bank (the issuing bank).
• Issuing Bank Approval: The bank checks the card details and confirms whether the patient has enough funds or credit to cover the transaction. It then approves or declines the payment.
• Transaction Completion: If approved, the funds are transferred from the issuing bank to your merchant account, with the transaction fees deducted. After that, the remaining amount is sent to your business bank account.

Breaking Down Credit Card Processing Fees

Credit card processing fees can significantly impact your dental practice’s bottom line. By understanding these fees, you can better manage costs and even identify ways to save. Here’s a simple breakdown of the key components:

1. Interchange Fees: These fees are determined by card networks such as Visa and MasterCard and are paid to the bank that issued the customer’s card. They usually make up the largest part of credit card processing expenses. The fees vary depending on the type of card used (e.g., rewards cards often carry higher fees) and the transaction context (e.g., in-person or online). Typically, interchange fees range from 1.3% to 3.5% of each transaction.
2. Assessment Fees: Also known as service fees, these are charged by card networks for utilizing their payment systems. These fees are generally a minor percentage of the transaction, about 0.14%.
3. Processing Fees: These are the fees your payment processor charges for handling the transaction. They can be a flat rate per transaction, a percentage of the transaction amount, or a combination of both. These fees usually mirror the interchange fees, ranging from 1.3% to 3.5%.
4. PCI Compliance Fees: Some processors charge a fee to comply with Payment Card Industry Data Security Standards (PCI DSS). This compliance is essential to protect sensitive cardholder data and minimize the risk of security breaches. These fees can vary, with some monthly charges between $5 and $15.
5. Chargeback Fees: If a patient disputes a charge and it leads to a chargeback, you might face additional fees. Frequent chargebacks can result in penalties and higher processing rates. Chargeback fees generally range from $15 to $50 per incident.
6. Monthly Fees: Some processors also charge a monthly service fee for maintaining your account and providing customer support. This fee can vary widely, generally from $30 to $150 per month, depending on the provider and included services.

On average, credit card processing fees for a transaction range from 2% to 4% of the total transaction amount. Understanding these components helps you manage costs effectively and get the best value from your payment processor.

Understanding Credit Card Processing Fee Models for Your Dental Practice

Managing credit card processing costs effectively means understanding the different pricing models available. Here are the primary models you might encounter:

1. Flat-Rate Pricing: This model offers simplicity by charging a consistent fee for all transactions, regardless of the card type or transaction method. For example, you might see a rate like 2.9% plus $0.30 per transaction. While easy to predict, this model might not be the most cost-effective for businesses with high sales volumes or those processing various card types.
2. Interchange-Plus Pricing: This more transparent model involves charging the actual interchange rate set by the card networks plus a fixed markup. For example, if the interchange rate is 1.8%, the processor might add a 0.5% markup, making the total fee 2.3%. This allows you to see the exact costs and the processor’s margin.
3. Tiered Pricing: In this model, transactions are categorized into tiers — qualified, mid-qualified, and non-qualified—each with its fee structure. Rates might be set at 1.8% for qualified transactions, 2.5% for mid-qualified, and 3.5% for non-qualified transactions. Although straightforward, this model can lack transparency, making it hard to pinpoint the true cost of each transaction.
4. Membership or Subscription Pricing: This model charges a monthly fee for access to the processor’s services, often with little to no markup on individual transactions. It’s especially cost-effective for businesses with high transaction volumes, significantly lowering per-transaction costs.

7 Cost-Cutting Strategies for Reducing Processing Fees in Dental Practices

Here are some practical strategies dental practices can implement to reduce fees and improve cost efficiency.

1. Finding the Best Credit Card Processing Rates

Maintaining low credit card processing fees is essential for the financial health of any successful dental practice. Dentists often continue using the same payment processor over the years, under the impression that finding a new one could be too cumbersome or might not yield much cost savings. This misconception can result in paying more than necessary. A little investigation and effort could uncover more competitive rates that align with the specific needs of your practice, possibly leading to substantial annual savings.

Start this process by obtaining quotes from multiple credit card processors, ensuring each quote includes a comprehensive breakdown of all associated fees. Look out for hidden charges, such as monthly minimums, batch processing fees, or PCI compliance fees. It’s important to understand all costs involved as you compare your options. Negotiation is key; many processors will modify pricing or offer special discounts to secure your business.

Membership in a dental association could also be beneficial, as many associations negotiate discounted processing rates with vendors exclusively for their members. These exclusive deals can offer savings that might not be available when approaching providers independently.

Although switching processors might seem daunting, the financial rewards can be significant. Choosing a processor that offers lower fees and straightforward pricing could save thousands of dollars each year, positively impacting your practice’s profitability.

For example, a processor charging a 3% fee on a $50,000 monthly volume incurs $1,500 or $18,000 annually. In contrast, Host Merchant Services (HMS) offers interchange-plus pricing at 1.8% + 0.25% + $0.10 per transaction, reducing fees to $1,025 monthly or $12,300 annually — saving $5,700 yearly. Savings depend on transaction volume, interchange rates, and card types.

Note: Actual savings depend on various factors, including transaction volume, average transaction size, interchange rates, and card types used. It’s essential to consider all components of the pricing structure when comparing processing fees.

Additionally, it’s important not to become complacent. Continually assessing and comparing your credit card processing fees is crucial to ensure you’re not overpaying. By remaining active in managing these costs, you can maintain lower expenses and use the savings to invest in expanding your practice.

2. Introducing a Cash Discount Program

A cash discount in your dental practice minimizes credit card processing costs while enhancing patient satisfaction. Providing a modest cash discount to patients who opt for cash or check payments encourages swifter transactions. It decreases the hefty credit card use fees, typically hovering around 2% to 3%.

Applying a set discount to the total invoice for patients paying by cash or check not only makes dental services more economically accessible but also boosts your office’s financial efficiency by cutting back on the lag tied to insurance or credit card processing. Additionally, it reduces the administrative burden by lessening the need to handle credit card payments and resolve related disputes.

The advantages extend further. Reducing credit card transaction volumes can lead to substantial savings on processing fees over time. Providing such discounts can also attract budget-aware patients, enhancing the appeal of your services amid fierce competition. Handling more cash payments simplifies your financial operations, allowing you to allocate more time and resources to other areas of need.

Setting up a discount scheme benefits everyone involved: it offers your patients more accessible payment options while bolstering the economic stability of your practice.

3. Offering Cost-Effective Payment Options

For dental practices, keeping payment processing costs in check is essential to maintaining financial health. One way to achieve this is by encouraging patients to use more affordable payment methods, like Automated Clearing House (ACH) transfers or third-party payment platforms that offer lower transaction fees.

ACH payments are budget-friendly, with fees often as low as $1 per transaction—much less than the 2% to 4% typically charged for credit card payments. These transactions also provide added benefits, such as predictable deposits and improved cash flow stability. Additionally, ACH payments reduce the risks of handling cash or checks, offering a secure and efficient solution for your practice and patients.

4. Simplify and Save by Optimizing Your Payment Processing System

Enhancing the payment processing approach in your dental practice effectively reduces credit card fees and increases operational efficiency. Equipping your staff with the right tools and thorough training can help streamline the payment process, minimize mistakes, and cut costs, ultimately improving the overall patient experience.

Investing in cutting-edge payment technologies like EMV chip readers and contactless payments has multiple advantages. These technologies expedite the payment process, bolster security, and minimize the risks of fraud and chargebacks, potentially lowering your processing fees. Additionally, patients will value the speed and ease of a simplified checkout process.

Opting for a payment system that integrates directly with your practice management software can transform your financial workflow by automatically updating patient accounts with each transaction, minimizing the chance for manual data entry errors. It also accommodates various payment types, including credit cards, ACH transfers, and online payments, ensuring a fluid patient experience whether they pay in person, over the phone, or online.

However, even the most sophisticated payment system requires proper utilization to be effective. Training your team thoroughly to manage transactions competently is crucial. Common errors like miskeying payment amounts or delaying the batching of payments can lead to increased fees and financial losses for your practice. Regular training and well-defined procedures can help your team avoid these issues, enhancing accuracy and reducing unnecessary expenses.

5. Credit Card Surcharging

Adding a credit card surcharge—a small fee applied when a patient pays with a credit card—can help offset these costs. However, this approach requires careful consideration to ensure you comply with regulations and maintain strong patient relationships.

Credit card surcharging involves adding the fee on the transaction amount to a patient’s bill when they choose to pay with a credit card. This allows your practice to pass the cost of processing fees to the patient, reducing financial strain on your business.

Before implementing surcharges, it’s important to understand the legal landscape, as rules vary by state and country:

• Prohibited States: Some states, like California, Connecticut, and Massachusetts, have laws banning credit card surcharges. For example, starting July 1, 2024, California requires all fees to be included in the listed price of services or goods.
• Permitted States: States such as Colorado allow surcharges but impose limits, like capping fees at a certain percentage and requiring clear disclosure to patients.

In addition to state regulations, credit card companies have rules about surcharges. Key requirements include:

• Transparency: You must disclose the surcharge to patients before completing a transaction.
• Fee Limits: Surcharges cannot exceed the actual processing fee, generally capped at around 4%.
• Applicable Transactions: Surcharges apply only to credit card payments, not debit or prepaid cards.

While surcharges can help manage costs, it’s essential to consider how this might affect patient satisfaction. Unexpected fees can frustrate patients, especially if not communicated clearly.

Clearly explain the surcharge and why it’s necessary — and offer alternatives, such as cash, checks, or debit cards, to give patients more flexibility. Lastly, ensure your staff can confidently and empathetically explain the surcharge policy to patients.

6. Minimize Chargebacks

Chargebacks can hurt both the financial health and reputation of your dental practice. A proactive approach can reduce the risk and keep your business running smoothly.

• Leverage Fraud Detection Tools: Advanced fraud detection systems are a powerful way to stop suspicious transactions before they become chargebacks. These tools monitor transaction patterns, customer behavior, and other key data points to identify potential fraud and protect your practice.
• Be Clear About Return and Refund Policies: Confusion about returns and refunds is a common trigger for chargebacks. Create a straightforward, accessible policy and share it prominently on your website, at the checkout area, and on customer receipts. Patients who know precisely what to expect are far less likely to dispute a charge.
• Communicate Every Detail Clearly: Transparency is key to building trust and preventing misunderstandings. Ensure customers receive clear product or service descriptions, detailed receipts, and regular purchase or appointment status updates. When patients feel informed, they’re less likely to initiate a chargeback.

7. Streamline Payments with Transaction Batching

Batching transactions is a simple yet effective way for your dental practice to save on credit card processing fees. By grouping individual credit card payments into a single batch and submitting them together — typically at the end of the business day — you can reduce processing costs and simplify your financial operations.

Every credit card transaction goes through an authorization process to confirm the cardholder’s information and available funds. Once approved, these transactions are temporarily stored and transmitted as a batch to the payment processor for settlement. This approach processes multiple transactions in one go, making it more efficient and cost-effective.

Set up your payment processing system to automatically batch and submit transactions at the close of each business day. Automation minimizes the chance of human error and ensures consistency. Regularly reviewing batch reports can help you confirm that all payments are processed accurately and catch any discrepancies early.

Conclusion

Managing credit card processing fees is essential for the financial success of your dental practice. By understanding the various fees, transaction models, and strategies, you can make informed decisions that reduce costs and improve your bottom line. Implementing cost-effective measures such as finding the best payment processor, offering cash discounts, encouraging alternative payment methods, and optimizing your payment systems can lead to significant savings.

Additionally, practices should stay proactive by reviewing rates regularly, minimizing chargebacks, and simplifying payment batching. With these strategies, your practice can reduce unnecessary expenses and focus on growth, benefiting your business and patients.

Frequently Asked Questions