Iowa News

Best Card: Surcharging Credit Cards: Legal, Complicated, Risky

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By Phillip Nieto, President Best Card Team

Good idea or bad idea?

Recently, Best Card received a call from a dentist asking whether it was legal for a dental office to surcharge credit card processing costs to their patients. Example: patient bill is $100 and you charge their credit card $104. While most credit card processors can offer a solution like this, the bigger question is whether it’s actually a good idea for your practice.

Best Card is the endorsed credit card processor of ADA Member Advantage and 40+ state dental associations, and we wanted to supply information to help dentists decide if passing through surcharges is a good fit for their practice. A lot of processors are aggressively promoting surcharging solutions because they make significantly higher profits than on normal credit card processing, while claiming to be saving you money. They will often use the term “Cash Discount Program” to describe their surcharge. While adding a surcharge is now legal in every state except Connecticut and Massachusetts, there are specific reasons why most businesses decide not to surcharge their customers. In the dental industry, these reasons may have an even greater impact.

  1. Your surcharge must abide by Visa, Mastercard, Discover, and American Express regulations. Here are those requirements:
    • If you surcharge ANY credit cards, you must surcharge ALL credit cards. You cannot choose NOT to surcharge once you begin surcharging cards.
    • You can surcharge credit cards, but cannot surcharge any debit cards.
    • You are not allowed to surcharge cards for cardholders from states where surcharging is illegal. If your business is in NY, and the cardholder lives in Massachusetts or Connecticut, you are not allowed to surcharge.
    • You must register with all four card brands a minimum of 30 days in advance. If you do not register, then you’re not surcharging correctly.
    • You must place notifications of surcharge at all payment stations and entrances to the business.
    • If a fee is added to credit card transactions, it doesn’t matter that your processor calls it a “cash discount” - it is a surcharge.
    • You are allowed to surcharge equal to your average fees paid over the past quarter - up to 4%. To avoid recalculating, many processors will set pretty steep flat rates of 4% on all cards.
  3. Customers hate being surcharged. Studies show that between 65%i and 95%ii of customers who have been surcharged are less likely to patronize the business again. In dentistry, where customer loyalty is important to maintaining your patient base, these numbers should be a red flag. There’s a reason major stores haven’t decided to add a surcharge; it’s difficult for businesses to compete, and it’s only made more difficult if you’re angering customers.
  5. It’s a huge increase in cost. Most surcharge programs have a flat monthly fee ($40 is common), and then the patient is charged a 3-4% surcharge that the processor keeps. Best Card’s average dental office has an effective rate (all rates & fees divided by total amount run in sales) of around 2.18%. If your processor is charging 4% to your patients, they are making an additional 1.82% profit at your patients’ expense.
    • All credit card processors have the same costs, so while Best Card makes a very small amount above that set cost, a processor running cards at 4% would make a huge profit margin. Why not simply raise your prices 4% and keep the profit margin that would have been going to the processor for yourself!
  7. Virtual Credit Cards (VCC) issued by insurance companies will not allow a surcharge. These are issued with an exact balance; try to charge a penny more and they will decline. Since regulations require that you surcharge all credit cards if you surcharge any, you’d need to lower your fee so that the payment, after the 4% surcharge is added, equals the VCC balance. Which means you’ll be paying the inflated surcharge rate out of your own pocket! The surcharge is reported to the card issuer and you risk the insurance company noting the pre-surcharged amount (indicating you have a lower actual cost), prompting an audit that could reduce the UCR (Usual, Customary, and Reasonable) reimbursement that you receive for procedures.
Let’s face it, cost-saving measures that end up costing your business in the long run simply do not make sense. While Best Card can provide surcharging systems, we prefer to offer consistently low rates to ensure that your monthly bill is as low as possible. This is one reason that the average dental practice saves 24% in card processing fees with Best Card. Call 877.739.3952 or visit to learn about the many processing options available, including automatic payment posting into dental software.


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