Do you feel like your dental office’s credit card processing statement arrives in a foreign language? Don’t worry. It’s not just you. Many dentists struggle to read the statements from their payment processors. With countless lines and columns of fees and assessments, it can be extremely confusing. Understanding basic elements of a credit card processing statement and how to interpret them is not as hard as it seems.
A statement for dental credit card processing is no different than the statements used for other industries. Statements might vary between payment processors, but these fundamentals are generally the same. Understanding your office’s statement will also help you find and lower excessive fees or help you become more educated when you negotiate your next contract.
Basics of a Dentist Credit Card Processing Statement
Every dental credit card transaction includes three basic fees:
- Interchange fee
- Network fee (AKA “assessment”)
- Markup
These fees can vary significantly between processors, transaction types, and pricing models. Depending on which pricing model your practice has, these fees will appear differently on your statement, as well. Learning about the different models can help you and your bookkeepers make good decisions as your dental practice grows.
Pricing Model
To understand your practice’s statement, you need to first understand what type of pricing model you have. Since every pricing model has a different philosophy and assessment of fees, it makes sense to understand how your specific model determines charges. There are three main types of pricing models used by dentist offices today:
Tiered Pricing
With this type of pricing, your credit card statement will be much easier to understand, but dentists using this billing method are probably paying higher rates. This model takes all patient payments and categorizes them into tiers, generally referred to as qualified, mid-qualified, and non-qualified. Each transaction in a given tier will be charged at the rate that has been assigned to that tier. This makes the credit card statement less confusing and more streamlined for bookkeeping.
However, this is not typically the most affordable option for merchants. Each payment provider has the ability to set rates and categorize transactions into tiers specific to each dental office. More often than not, dentists are unprepared for the stark difference in costs between tiers. Moreover, it can be difficult for dental bookkeepers to compare payment processors prior to choosing one because one may categorize a certain transaction type as mid-qualified while another classifies it as non-qualified, drastically changing the fees assessed for that payment.
Flat Fee
This model aims to simplify the processing statement by charging a flat fee for each transaction. It can be extremely beneficial for bookkeepers when it comes to planning and budgeting for a dental office. Offices often predict how much will be spent each month in processing, offering accurate estimates which can be very helpful to dentists. However, flat fees can become confusing if a company charges a different flat fee for credit card purchases versus debit cards, or card-present versus card-not-present.
Another drawback for dentists to this model is that the flat fees are often much higher than they would be with other pricing models. With a flat fee pricing model, the processor will include the interchange fee, network fee, and markup in the flat rate. Since the fee is the same for every transaction, the set rate is high to account for more expensive patient cards.
Interchange Plus
Interchange plus pricing tends to be a good middle-ground for many dentists because a large portion of transactions are at cost. Payment processors using this method pass on the interchange fee to the dentist at cost and then charge a fixed rate per transaction for themselves and the credit card networks. Each transaction has the standard interchange fee that is charged by that specific card, along with the fee charged by your provider.
The great thing about this pricing model is that it’s much more cost-effective than the others. Dentists don’t have to be concerned about how transactions will be categorized. Dentists don’t have to worry about small transactions being charged more than they should be, as is often the case with flat fee processing. The only drawback is the difference between the interchange fees, which can vary significantly between card-issuing banks, and are at times difficult to anticipate or plan for.
Interchange Fees for Dental Offices
These are fees charged by the card-issuing bank to the dentist and are expressed as a percentage of the total transaction along with a fixed amount. These fees are assessed for every transaction to cover the costs of processing the transaction and other services associated with the sale.
These are more accurately called interchange reimbursement fees because a processor does not keep any of these fees. This is what they are required to pay to the card-issuing bank for processing a transaction. Interchange fees will vary drastically from one patient bank to another, weighing heavily on the type of card used by the patient.
Dentist Network Fees
Logically, these are fees charged by the credit card networks such as Visa, MasterCard, etc. These fees are generally very small compared to the interchange fee, roughly 0.05%, which is significantly less than the interchange fees. Again, these fees will be assessed by the dentist’s office’s payment processor, who will then need to pass them on to the card network.
Markups
This is how the dental payment processor makes a profit. While the interchange and network fees have to be paid by the processor to the appropriate entities, the markup is the fee kept by the processor. Depending on your pricing model, it could be really difficult to determine what the markup is for your specific payment processor. However, dental offices using an interchange-plus pricing model will have this fee listed on a separate line item. Understanding what these fees are can be critical to your office’s success in negotiating better rates or finding a more cost-effective payment processor for your dental transactions.
Finding the Best Dental Payment Processor
Now that your office has a better understanding of statements and fees, your bookkeeper and yourself can move on to making some decisions. If you feel as though your office is being charged too much, you now have the ability to shop around to other dental payment processors. The key piece of the puzzle is to find a processor who has transparent fee schedules and is willing to work with your office on the markup.
No payment processor has the ability to negotiate or lower the interchange or network fees, but some will definitely add a markup to each one. Knowing how to identify these in your dental statement will help you compare providers side-by-side and determine the best one for your business. Overall, the single most important element in finding a better rate on dental credit card processing is to start by looking directly at the payment processor markups.