August 27, 2012
Ever wonder if you are over-paying for credit card processing? Is your practice bombarded by callers saying that your credit card terminal is not PCI-compliant, not EMV or NFC ready, and/or not receiving Durbin debit rates? Or maybe you’ve been told that your practice’s credit-card processing account is set up for retail, but should be set for healthcare? These are simply marketing calls, aimed at taking advantage of the fact that credit card processing is a complex and ever-changing industry. When you and your staff are armed with the facts, you will be ahead of the game. Best Card is your Washington State Dental Association’s endorsed credit card processing company, and together we are working to keep you informed. Read on for answers to the questions we hear most.
1. How can I determine the cost I am actually paying to take credit cards? Is my account set up properly to get the best rates?
Calculate your effective rate. As you have probably noticed, many credit card processors have hidden fees and costs. While promising you a low rate, they neglect to mention all the downgrades that will occur if a card is keyed in, or is a “rewards” card (such as one that earns airline mileage), or any number of factors. Best Card has spent the past 9 years trying to educate their merchants (including thousands of dentists) on the simple way to calculate their true processing costs.
Add all the costs and fees on your credit card processing statement (include AMEX and monthly statement fees, PCI compliance, etc.) and divide that number by the total dollars processed that month. This is your true effective rate. (Example: $272 ÷ $9876 = 0.0275 or 2.75%). If this percentage is higher than 2% -- you
may be paying too much.
Leased equipment. The above calculation does not take into account any costs for leasing equipment – the single costliest mistake that many practices make. Did you know that most credit card processing leases run 3-5 years at $15-$75/month – and then often require a buy-out of the equipment at the end of the lease? Don’t pay thousands of dollars for equipment that you can purchase for $150-$450.
Healthcare vs. Retail. If your office receives a call from someone stating that it’s set up as retail, not healthcare, be aware that the salesperson has no idea what your office’s rates are; he/she is simply trying to send a salesperson there.
MasterCard, Visa, and Discover charge the same “interchange rate” to all merchants, based on the type of card that is being processed (there are more than 750 types)—not by whether a merchant has a dental office or a restaurant. You’ll always pay the lowest percentage fee for debit cards (as opposed to credit cards). Also keep in mind that it’s more costly to process rewards and corporate cards; and that swiping a card is less expensive than keying a transaction, as there’s a higher chance of fraud when a card is keyed, since the cardholder is not present.
In the credit-card processing industry, only American Express has a different rate for processing its card based on the Standard Industrial Classification (SIC) code of the merchant (for dental practices it is 8021). Best Card’s AmEx rate is 2.55% (your processor may charge more).
2. Pin Debit vs. Signature Debit. Should we have a pin pad? What is the Durbin Amendment, and what does it mean to my practice?
Regulated vs. Non-Regulated Banks. In the Durbin Amendment to the Dodd Frank Act, Congress established two ratings for banks issuing debit cards: 1) a bank with assets greater than $10 billion (like the issuers of approximately 70% of all cards), is a regulated bank; 2) a bank with assets less than $10 billion is a non-regulated bank. A provision of the Durbin Amendment then limited the rate that those regulated banks can charge for debit cards, and took effect on Oct. 1st, 2011. At that time, Best Card lowered its rate on regulated debit cards by almost 60% to pass its savings to WSDA members (debit is now .51% + $.30 per transaction). Most processors did not lower their debit-card rate for their existing merchants.
Pin Debit vs. Signature Debit. Prior to the Durbin amendment, if your patient was able to enter a pin number when using their debit card, it would often lower the rate you were charged significantly. Currently, if the debit card is issued by a regulated bank, there is no difference in the charge to you whether they enter a PIN or simply sign the receipt. Debit cards issued by non-regulated banks can charge more, and you will sometimes get a better rate by using a pin pad for these transactions. In most practices, there are not enough transactions on debit cards from non-regulated banks to make it cost-effective to purchase a pin pad.
3. What is PCI Compliance? How can I be sure that my practice is compliant?
PCI stands for “Payment Card Industry” and PCI standards (regulated by MasterCard®, Visa® and Discover®), mandate that all merchants complete an annual compliance questionnaire. While the questionnaire is confusing, the gist of it is to ensure that merchants are protecting their cardholders’ information. Most processors charge a monthly “non-compliant” fee of $10-$25 to merchants who have not completed it. If you have an online system for accepting payments, you must have a quarterly computer scan completed by a certified company to ensure that your firewalls and computer system cannot be easily compromised. Do not store full unencrypted card numbers on your computer. Your credit card receipts (both merchant and customer) must truncate the account number (i.e., it must not show the entire credit card number). If you receive a call stating that your office is not PCI-compliant, unless it’s your office’s processor (which would know your merchant account number), be aware that the caller is a salesperson using an underhanded tactic to gain the practice’s credit card processing business, and has no idea whether or not the office is PCI-compliant.
4. Insurance Claims paid by Credit Card – do we have to accept these?
Best Card has received many calls from dental offices that go something like this: “We received reimbursement for an insurance (or health benefit) claim that tells us to key the credit card number into our credit-card terminal in order to receive the insurance payment (in lieu of receiving an ACH deposit or a check). What should we do?” The answer to that question is: key the card number in to get paid.
While there may be more companies that have begun issuing payment this way, Best Card receives the most calls about: CoreSource/VPay, QuicRemit, and EBMC (Employee Benefit Management Corp.). If you call one of these companies to request an ACH payment or check, you’ll be told that if your office accepts credit cards as a form of payment, it cannot discriminate; it must accept its payment in this manner. If you read the terms of agreement for accepting credit cards in the program guide provided by your processor, this is technically correct (and Best Card has talked to representatives of Visa® and MasterCard®). These companies will also tell you to check with your credit card processor to see if you’ll be charged fees to run the transaction. The fact is: you are charged fees. For most card-processor companies, the interchange cost they pay to Visa® or MasterCard® is greater than 2% on these cards, and this cost is passed on to you.
5. Do I need a new credit card terminal for this EMV or NFC technology that is coming?
Europay, MasterCard® and VISA® (EMV) is the sophisticated integrated-circuit (IC) “chip” technology that will eventually replace the magnetic stripe on credit cards that has been the standard in the United States since 1960. Both PCI standards and EMV technology are designed to help reduce credit card fraud and identity theft. Now more than ever, protecting your patients’ identities and cardholder data is critical; both to your patients and the security of your practice. The EMV chip is fraud-fighting technology: it’s extremely resistant to fraud attempts, because of its use of dynamic data (versus static data that is on a magnetic stripe).
EMV has already replaced magnetic-stripe cards in 60 countries (including Canada and most of Europe), and the card associations (such as Visa, MasterCard, Discover and American Express) have all announced phase-in plans for the EMV technology for the United States. First, credit card issuers must have this chip in cards starting in 2013, and EMV technology will eventually require changes in terminal equipment in order to read these chips. Processors do not have to have the programming in place until April 2013, and manufacturers of the equipment will be working to refine their technology. Acceptance of EMV will not technically be mandatory for merchants – but the final milestone, and the only one affecting you, will be October of 2015, when fraud liability begins shifting to the merchant if EMV is not utilized. You will receive calls implying that you need to purchase new equipment now, but this is simply not the case, and costs will most likely come down fast. As always, avoid signing equipment leases; you’ll most likely pay 10-15 times more than if you’d purchased the equipment.
Also coming in the future: payments being made using Near Field Communications (NFC) technology, which enables one to make a payment by waving his/her cell phone near NFC-enabled credit-card processing equipment to capture payment information. This is also “chip” technology – and it will be phased in along with the EMV technology.
6. Is on-line processing available? And is that the right choice for my practice?
There are many systems available for taking credit cards on your computer and using your smart phone, and some practices even want to accept payments at their websites. If you have a large number of recurring billings, it can be especially cost-effective to have a system which automatically runs these transactions.
With an on-line system, you will have a gateway and you will use “swipers” (card readers that plug into your USB port or your smart phone) to swipe the cards. Best Card can show you via test accounts how it all works.
If you’d like more information about the material presented in this article, please feel free to call WSDA’s endorsed credit card processing company, Best Card. It offers excellent rates and customer service to WSDA members, and has a wealth of knowledge about the credit card processing industry. Contact Best Card at: (877) 739-3952, or visit bestcardteam.com or fax a recent credit card processing statement to them at (866) 717-7247 for a complimentary cost comparison.
For more information regarding WSDA endorsed providers, please visit www.wsda.org/endorsed-products/.