Recently, I read through an article written by an irritated employee who realized she was being grossly overcharged for her credit card processing and decided to take on the daunting task of finding better credit card processing rates for her dental office. What she ended up finding was an industry ripe with underhanded tactics and greed. Once she finally accomplished the formidable task of finding a reputable merchant services provider (MSP) she decided to write the article to give tips on how to avoid being screwed over and to help others watch out for unscrupulous salesmen. This is a common problem with the merchant services industry with all types of businesses, but it is particularly rampant in medical and dental offices.
Accepting credit cards in your dental practice doesn’t have to mean getting drilled.
Allow me to tell the story of a dental office we were recently given the opportunity to review their statements. You see, they were offered this fantastic rate, a super low 1.84%, but when they got their statement each month their bill just seemed so expensive! And they really couldn’t figure out why. They would look at the first page and it would show all their transactions and card types and sure enough the rate was 1.84% and $.19 per transaction. But the bill just didn’t seem to calculate. Has this ever happened to you?
We took a look at their statement and dissected it. It took a lot of calculations, extracting of various fees and digging for hidden fees and what we found was truly astonishing! Even for us! There were so many places they padded the prices I don’t even know where to start. But, I‘ll start with the base of everyone’s costs, interchange. They padded the interchange categories with 4 basis points and they padded the fixed Visa/MasterCard assessments with 9 ½ basis points. Then they padded the nightly batch with 15 basis points on the volume of the batch. Now, this might not sound like a lot to you but, what if i told you that most quotes we give our entire mark up is 15 basis points? They are being charged that on just the batch alone. What they forgot to mention was that the 1.84% was only on cards that fell in the Qualified Tier and most of them didn’t. This is called the bill back method, where the merchant gets charged a surcharge the next month for every card that didn’t qualify for the 1.84% rate. When all was said and done it ended up they were being charged a colossal 68 basis points hitting them with a true effective rate of 3.05%, all the while still being told and promised their rate was only 1.84%! And it ended up costing them more than $300/mo or $3600 a year more than they really should have been paying.
Think about it, when was the last time you went to the dentist and your appointment was on time? These offices are very busy, often scheduling back to back and overlapping appointments, not to mention the unforeseen emergencies that do their best to throw off the flow of the whole day.
This is exactly why dentists are a prime target for being taken advantage of. Merchant services is an industry of door-knocking and dental offices are just too busy to bother with them, and unlike the lady from the article, most office managers just don’t have the time to dedicate to getting new quotes for something already up and running. Salesmen know that their account is just not going to get shopped. If you’re an unscrupulous salesman this type of office is like a pocketful of candy.
For this reason dental offices often get hit with a whole slew of extra fees and inflated rates that other businesses just wouldn’t stand for. They often get hit with a significant start up fee and/or an annual maintenance fee on their account. Statement fees, cancellation fees, exorbitant batch fees, this fees and that fees…. All kinds of extra stuff that the salesman knows he can get away with since no one ever shops them.
These fees are different and in addition to the fees actually involved with processing the credit card transactions and are 100% unnecessary. Any processor worth his salt would not be charging these fees.
Fair and transparent credit card processing for dental offices can be found!
So here we are, a MSP, trying to tell dental offices that we can provide them with the fairest, most transparent credit card processing rates and incomparable customer service, while all of these unscrupulous salesmen are out there giving us a bad name!
One of the very first points she makes to help spare you is “If it comes from a merchant service rep, it’s probably a lie”. She is not wrong. I, myself, have written articles about the culture of merchant services salesmen and what to watch out for. We have spent a lot of time writing articles and trying to educate people about their merchant services, understanding rates and how to find a reputable processor. We have worked hard to try to stand out in the crowd and prove to our business partners that we are indeed different, reputable, accountable.
It is possible to partner with a great MSP and experience the value of fair rates and exemplary customer service.
Education is where it all starts. While you do not need to take a course in merchant services it is important to have a general understanding of billing types or practices. Arm yourself with the knowledge of where merchant service fees come from and where they go, and which fees are negotiable (there are some!) and which are fixed in order to avoid being taken advantage of.
Let’s dive in and get a bird’s eye view of what your credit card processing rates and fees mean.
It all starts with Interchange, but what is it? Who sets it?
Interchange is the base cost for accepting any card. It is a percentage based fee plus a per transaction fee that is assessed to each and every card type on the market and it is set by the card issuing banks, such as Chase or Capital One. The percentage and transaction fee will vary for every single card there is out there. Corporate and business cards are among the most expensive out there, as are rewards and mileage cards. Your everyday no-reward credit card and debit cards have the lowest fees. There is no avoiding or modifying (we’ll talk about watching out for this later) Interchange cost and it is the base rate that is charged across the board and is passed through to the merchant by the processor.
Next you have your assessments, these are fees that are set by the card brands themselves.
Card brands being Visa, MasterCard, American Express, and Discover. These assessments are published openly on the card brand’s websites and are not negotiable. They will also be passed through to the merchant by the processor. Usually when we talk about “Interchange fees” we are referring to both of these fees together as the basis of your processing costs, because they are both non-negotiable and set by entities other than the MSP.
Finally you have the MSP’s mark up or service fee.
This is their fee for providing you with the ability to accept the credit cards from the card issuing banks. This mark-up is expressed in what is called “basis points” and a per transaction fee. Basis points are the portion of your processing fees that the merchant services provider adds to the interchange costs. It is their mark-up, so to speak. A basis point is 1/100th of 1%, or 0.01%. So when a processor says they are charging you 25 basis points you can realize that is 0.25% or one quarter of 1%.
Everything else, all of those cancellation fees, statement fees, batching fees, processor assessments, customer service fees, this fees and that fees, ALL of these fees are definitely negotiable. Certain fees cannot necessarily be abolished entirely, but they also do not have to be excessively padded.
This is really the “basis” of the Interchange Plus Pricing model and we think it is the most fair and transparent method of pricing for every merchant. This means that no matter what the interchange price is for each and every different card you might accept over the month, you are always paying the exact same markup. Tiered pricing on the other hand is very deceptive and confusing. There’s so much going on it’s hard to see the forest for the trees. Agents that offer tiered pricing have much more control over how much money they make and passing it off as card brand or bank costs. This is because they put all the various cards you accept into three categories: Qualified, Mid-Qualified, and Non-Qualified. Obviously, Mid-Qual and Non-Qual are more expensive than a qualified card. The problem is that most people don’t realize that they can decide which cards actually fall into each category, they are able to take those hundreds of card types and choose which card types fall into which tier based on their interchange cost. You have no idea what percent of each card you will end up taking throughout doing business. They can promise you a great rate on all qualified cards that sounds awesome and then make sure most of your card types won’t fall into that category! Then claim that it’s not their fault your cards are not qualified! This inevitably results in a rate that they can say is something like 1.84% which does not reflect the true effective rate of the account, which could actually be closer to more than 3% when calculated properly.
With Interchange Plus Pricing there is no qualified or non-qualified. It is the same amount of basis points whether it is an expensive corporate or mileage card or it’s an everyday, regular Visa card with no bonuses. This is a much more transparent way of pricing. This is why it is a good idea to let the processor offering you a competing quote to see your statements. First, you won’t necessarily know this is how you are being charged and it would be very difficult to compare the effective rate of the two quotes because it’s like comparing apple and oranges. They would be able to find hidden charges, like padding the assessments. Remember the card brands assessments are a fixed percentage posted on their website and you can tell if a processor is just passing the fee through or adding to it.
Interchange Plus pricing will guarantee you the most cost effective form of merchant account pricing. This pricing model helps to prevent hidden surcharges and allows you the ability to see exactly what the bank is making and exactly what the processor is making off of servicing your business.
Now you know about how you should be charged, how do you find a processor you can trust?
It’s very tempting to go with whoever is offering you the lowest rates, but that isn’t always the best idea. Firstly, often this low rate isn’t really true. It could just be a low introductory or teaser rate that is just going to go up as soon as your salesman is no longer anywhere to be found. As we’ve seen above it can be a false promise that doesn’t actually reflect the true effective rate of the processing as a whole. You also need to take into account the MSP’s ability to deliver on security and PCI compliance. Customer service is not something you should have to sacrifice just to get fair rates. Your Merchant Service Provider as an integral part of creating a successful business model and should be thought of that way.When you partner with a MSP that sees you as a valued customer and supports your business. Afterall, you are their customer.
Bankcard Brokers is proud to service many dental associations nationwide.
In the article mentioned above the writer states that salesmen of merchant services do not have to complete any training or education. She’s 100% correct. It’s true that many salesmen are given the promise of easy income flowing in every month, work once get paid forever. They knock on doors, sign up the client and never look back. Customer service? What’s that?
That is not the case with Bankcard Brokers.
The key point here is that they do not “have” to complete any education. Our salesman do anyway.
Every one of our salesman are required to become ETA-CPP certified. A very rare feat in this industry. This is a certification offered through the Electronic Transactions Association that involves completing rigorous course requirements, continued education and holding themselves to the ETA’s Code of Conduct. Bankcard Brokers’ staff holds themselves to the highest standards. We work very hard to differentiate ourselves from the crowd. We expect you to expect us to care as much about the success of your business as you do. And we do.
Our philosophy at Bankcard Brokers is simple. “Provide businesses the truth about credit card processing, become their trusted resource, and the result will be a successful long term business relationship.”