Physicians Practice Pearls: Look Out for Hidden Fees

March 1, 2009

If you accept credit cards, and you should, you’ll want to be aware of these hidden fees that card processors charge.


In today’s economy, you may feel increasing pressure to offer patients every possible method of making payment. So, after you decide to sign up with a credit card processing company and start accepting Visa and MasterCard, you have nothing else to worry about, right?

Not so fast. You may in fact be losing a lot of money through hidden charges. Card processing services can be a high expense many small- and medium-sized practices unknowingly incur, because they are hidden on their P&L statements as “bank fees.” Often these costs are unnecessarily high; careful attention to the details of your credit card processing can really pay off.

Take a look at some of the more common tricks credit card processors use:

Fee increases - Visa and MasterCard adjust rate categories one to two times each year. When rates go up, some companies and their agents use the opportunity to inflate them even more - and then deceptively blame the increase on Visa/MasterCard.

Fee reductions - Annual fee adjustments by Visa/MasterCard may also include reductions in some card transaction categories as well as incentives for certain categories of merchants and card types. Yet, merchant acquirers and their middlemen rarely pass these reductions on to small- and medium-sized merchants.

Middlemen - Card processing is a fairly simple process that requires four entities at most: A bank, a Visa/MasterCard, a telephone or Internet connection, and a processor. In some cases, however, as many as 12 additional, but different, entities get involved … each one taking a cut.

Surcharges and bill-backs - Visa/MasterCard charges as many as 110 different interchange rates. These are set by Visa or MasterCard and cannot be changed by a merchant acquirer. However, many merchant acquirers or their middlemen significantly inflate these set fees with surcharges - often called “bill-backs” or “enhancements” - that frequently are deducted the month following the actual transaction without disclosure.

Reasonable equipment costs - Availability of card processing equipment has become widespread, with warehouse clubs, consumer electronics stores, and online auctions routinely providing this equipment at very reasonable costs. Yet, many merchant acquirers sell the concept of multiyear leasing, locking physicians into costly, noncancellable, long-term commitments.

Take the time to look carefully for these signs in your statements. If you have a question, ask your customer service representative. If you do not get a satisfactory answer, start thinking about doing business with another company.

And what else should you look for in a processing merchant?

  • Encrypted card numbers and secure transactions;

  • Real-time fraud and transaction monitoring; and

  • Live customer support 24/7.

Despite the complex nature of credit card economics and the potential for bottom-line erosion, it still may be worth it to accept them. Offering patients the option of making payment via credit card could be better for your practice than sending endless bills that may or may not get paid.

Karen Zupko has been advising practices on management issues for the past 25 years. She can be reached at kzupko@karenzupko.com.

This article originally appeared in the March 2009 issue of Physicians Practice.