Considering Passing On Credit Card Fees To Your Patients? Here’s What You Should Know

Considering passing on credit card fees to patients?

The practice of passing along credit card related fees to patients is nothing new. The convention, widely known as surcharging (and its related programs) have been a hot topic over the last few years and are only growing hotter. Some see it as a way of offsetting the cost of doing business with credit cards, while others consider it an undue toll levied on loyal customers and clients.

For those in the healthcare space, it’s critical to understand not only how a program might affect your bottom line, but also any potential implications it might have on patient health.

Operating costs for dental practices are higher than ever, with credit card processing fees consistently cited as a leading business expense. At the same time, patients are struggling to afford care. A study conducted by CareQuest Institute revealed that more than half of surveyed Americans with oral health problems did not seek treatment, citing affordability as a key factor.

Two in five people deferred medical care during the past year due to financial struggles despite having dental insurance (Commonwealth Fund survey).

Given these inherent challenges, what is the best way forward for a practice? As an auditing expert in the processing world with decades of dental-related experience, I’m at a unique advantage to share the full story behind these programs and help identify the most compliant, and patient-friendly, option available.

Let’s start with the crux of the problem: the guidelines and laws surrounding these programs are unclear, ever changing and vary by state and area. The salespeople offering these programs do not understand how to properly set up a merchant themselves, and their only goal is to make a large residual income. They are not thinking of the practice, and they are off the hook if a merchant is fined for noncompliance.

Traditional Surcharge Program

A traditional surcharge program adds a fee to all credit card transactions—excluding debit. The first challenge here is how to distinguish debit from credit. Some businesses assume that a debit card is any card processed with a pin number. That is not the case. Pin number or not, a debit card is any card that takes money directly from a consumer’s bank account. This represents around 50% of all transactions.

The consumer may tell the merchant to run their debit card “as a credit card” without the pin—regardless, it’s debit and illegal to surcharge under the Durbin Act. The only way to run a true surcharge compliant program is to use a credit card machine or point of sale system that determines if the card is debit or credit before applying the fee. To complicate the issue further, some industries are tied to specific POS systems that do not have this ability.

Cash Discount Program

Next are the Cash Discount programs, originally designed as a way for processors to creatively add a service fee to all card transactions and then offer a discount for those paying by cash. Essentially, they changed the name of the program from “surcharge” to “cash discount” and added a fee, just to take the fee off. This is really a surcharge program which means it’s also illegal to offer a cash discount on a debit card. A true, compliant cash discount program lists the actual price and takes a discount off the listed price if the patient pays with cash.

Compliance Regulations

To compound the confusion, the tax implications are also a bit fuzzy. Practices must let their merchant acquirer and relevant card networks know they are planning to start a surcharge program—and you will need to make sure the processor is providing you with 1099K paperwork during tax season. If the money accrued from surcharging isn’t reported correctly, there’s a good chance it will come up as a red flag.

Best Practices

The safest way for a practice to participate in a surcharge program is to use a true cash discount, incentivizing patients to pay with cash, rather than penalizing them with a higher price for using credit cards. There is zero need to involve a processor, and all that’s needed is a well-priced merchant account. There’s no reason to have the processor charge a higher fee just to discount it! The simple answer to reducing these fees is for businesses to gain a better understanding of the credit card processing landscape.

It is vital to become more familiar with monthly statements—particularly potential hidden or junk fees—and use these data points to negotiate lower fees. This can happen through more vigilant auditing on a practice manager’s part or working with a third-party expert like Merchant Advocate who can help decipher these confusing statements. Find out more at

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