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Credit Card Companies Postponed a 2021 Rate Increase, But Will Your Processor?

Learn How to Keep More of What You Earn
Hand pressing buttons on a portable credit card processing machine
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Do you know what it costs to take credit cards at your practice? Most dentists have better things to think about than the minutiae of processing fees. However, because the last 10 years have seen the volume of credit card transactions at dental practices almost double, attention to those details can make a huge difference to your bottom line.

What are the real costs of running a patient’s credit card?

Every time a business runs a credit card, there is a direct cost that is set by the card issuer. This cost is identical for every credit card processing company and is known as the Interchange rate. Interchange is an important concept: because it is a hard cost for all processors, this is the minimum that can be charged on a transaction without a credit card processor losing money.

Interchange rates vary immensely. For example, debit cards are almost always cheaper to run than credit cards, even when processed without PIN. Reward cards are usually more expensive than regular credit cards. Similarly, card-present transactions (when you accept the card via chip/swipe/and even contactless payments such as cards saved on a smart phone), will get the lowest rate for that type of card. That same card manually keyed (whether for a called-in or website payment), generally runs at a slightly higher rate due to increased risk of fraud.

Did the cost to process cards go up in April of 2021?

Every April and October, the card brands — Visa, Mastercard, Discover, and American Express — adjust the rates that are paid by all businesses to run cards. While these changes are usually very small, the April 2021 changes were slated to be some of the largest increases in the last 10+ years.  Fortunately, pressure from Congress and COVID-19-impacted businesses persuaded the card brands to delay the majority of increases until April 2022. 

However, even though these rate increases were postponed, it does not mean that your costs won’t increase. First, not all processors pass through costs directly and it can be difficult to determine which fees are due to rate increases and which are added profit margin. Second, since rate and fee increases usually have to be communicated 30 days in advance, many processors had already initiated rate increases for their cards and notified their customers of the increase before the card brands announcements that they were postponing them. 

The majority of statements that our company reviewed for dental offices in March included notices of rate increases; many companies will move forward with these increases and pocket the extra fees they were going to have to pay to the credit card companies. On top of this, even without brand fee increases, many processors still raise rates several times per year. A good deal you received a few years ago may not be so great now.

How can practices minimize costs when taking card payments?

1. Do the math.

Grab a recent credit card processing statement and quickly calculate your effective rate. The formula is: Fees divided by dollars processed = effective rate. For example: If you paid $1,032.54 in total fees on $30,456.70 in credit card sales, your effective rate would be $1,032.54 ÷ $30,456.70 = 3.39%.

Effective rate is a great measure of your credit card processing costs. Statements can be difficult to decipher, but this simple math quickly shows what you are really paying to take credit cards. 

Best Card analyzes more than 1,000 dental office statements each year. Currently, most practices are paying over 3% to run their cards, while the average Best Card office pays 2.18%. Your effective rate will vary monthly, based on the types of cards you accept and how you accept them, but if you’re regularly paying more than 2.20%, it’s definitely worth taking a look at what your processor is charging.

2. Know the steps that you can take to lower your credit card processing costs.

Best Card has published 7 Rules for Lower Credit Card Processing Fees. These tips target lowering your Interchange costs on transactions, so if your processor doesn’t have you on pricing that lets you benefit from those lower costs, it may be worth seeing if you can get better rates.

About the author

Professional headshot image for author Phil NietoMr. Nieto is President of Best Card Team, the ADA Member Advantage-endorsed credit card processing solution. ADA members can submit a recent credit card processing statement to get a free analysis from Best Card on how much they might be able to save by switching to the platform by fax at 1-866-717-7247 or email to CompareRates@BestCardTeam.com. For more information, call Best Card at 1-877-739-3952.