Every dentist knows that accepting credit cards is a necessity. Furthermore, it seems that every year that goes by the percentage of patients paying by card goes up. That's why you probably don't need me to tell you that despite their convenience, credit card payments can carry very significant fees that eat directly into a practice's bottom line.
What's A Good Credit Card Processing Rate for a Dentist?
We get asked this question all the time and as is often the case, there is a long-answer and a short-answer.
The Long Answer
Ultimately a merchant's credit card rate is made up of three different sets of fees:
Interchange and Assessment Fees: These fees are charged by the Card Networks (Visa, Mastercard, Discover and American Express) and Issuing Banks (Chase, Wells Fargo, Capital One, etc.). These fees are set on an annual basis and are borne by both merchants big and small. Not only are these fees non-negotiable, but they are also published in what are known as Interchange Tables. You will notice that in these tables the processing rates are determined by credit card type (i.e. debit, credit, rewards, etc.) with rates ranging from 0.05% on the very low end (for regulated debit) to over 3% on the high end (for a business rewards card). While it's unlikely you'll remember the various fees by card type, a good rule of thumb is that debit cards are a much cheaper form of payment than credit cards.
Acquirer Processing Fees: These fees are charged by payment processors and are 100% negotiable. Generally the larger the merchant the lower the percentage payment processing fee, but with Zilment this doesn't have to be the case. There are various ways payment processors pass these fees onto merchants, and they do so by using one of the following pricing models:
Interchange Plus: The most transparent and typically the cheapest pricing model. With Interchange Plus pricing the merchant services provider charges a fixed percentage mark-up to the Interchange rates referenced above. This mark-up should be between 0.10% to 0.20% to be considered a "great" rate.
Tiered Pricing: The least transparent pricing model and typically very expensive. Also evidenced by words like "qualified", "mid-qualified" and "non-qualified." With this pricing model payment processors charge a flat rate by tier of card, but what they don't tell you is what tier each card falls into. As a result, it is more likely than not that more of your cards fall into the highest, "non-qualified" rate category.
Flat-Rate: A simple pricing model that is best for merchants processing less than $5,000 per month. With this pricing model businesses pay the same flat-rate no matter the card type. However, it's important to note that with this simplicity comes a hidden cost. That's because payment processors set the flat rate based on what they think your interchange fees will be. So for example if your interchange rates are 2.0% and you are being charged a flat rate of 2.5%, you actually end up paying a pretty high mark-up to interchange of 0.5%. For smaller merchants the difference of 0.5% may not add up to a lot, but for a merchant processing $20,000 per month the difference in fees is $1,200 per year.
Monthly and Non-Recurring Fees: As their names imply, these fees are charged on a monthly basis and are charged only when certain events, such as a chargebacks, occur. In general, all in monthly fees should be below $25.00 per month assuming you don't have excessive disputes. A list of common fees that fall in this category can be seen below:
Service Fees
PCI Compliance Fees
PCI Non-Compliance Fees
Statement Fees
Regulatory Product Fees
Account Fees
Minimum Monthly Fees
Chargeback Fees
Dispute Fees
TIN Mismatch Fees
So what's a good rate you're probably asking...
The Short Answer
One of the benefits of seeing so many processing statements is that we've gathered a large amount of data. Furthermore, because we analyze every statement that comes in we are able to breakdown various fees by their corresponding category.
Based on the data we've gathered, the average dentists should have all-in credit card processing rates around 2%
It's important to note that your rates may be higher or lower than the above, but if you're paying more than 2.5% you are definitely paying too much.
How Do I Calculate My Credit Card Processing Rate?
Your credit card processing rate can be calculated by dividing your Total Monthly Fees by your Total Monthly Processed Volume:
Credit Card Processing Rate = Total Monthly Fees / Total Monthly Processed Volume
Your Total Monthly Fees are the fees your merchant services provider deducts from your Total Monthly Processed Volume. For example if you processed $20,000 and your merchant services provider deducted fees of $500, then your Credit Card Processing Rate would be 2.5%.
Every payment processing statement includes a breakdown and disclosure of your Total Monthly Fees, so this is the best place to look for this number.
Example Monthly Statement:
In the above example the Credit Card Processing Rate equals 1.63%
How To Get a Great Rate
At Zilment our mission to to empower merchants with access to great and affordable payment processing rates. That's why if you are interested in finding out whether or not you have a good rate, or are just looking to get setup with a low rate, you can get started here.