As credit card processing fees continue to rise, many dental practices are looking for ways to offset these costs. One potential solution is passing merchant fees onto patients in the form of credit card surcharges. While this may seem like a straightforward business decision, it comes with legal, ethical, and patient satisfaction considerations.
Before implementing a surcharge policy in your practice, it’s crucial to understand the current laws, the potential impact on patient relationships, and the professional guidance available on this topic.
What Are Credit Card Surcharges?
A credit card surcharge is an additional fee charged to a patient when they use a credit card to cover the cost of processing that payment. This practice has become more common as businesses look to offset transaction fees imposed by card issuers.
While it might seem like a simple solution, surcharging is heavily regulated, varies by state, and can negatively impact patient satisfaction and retention.
The Patient Perspective: Will Surcharging Hurt Your Practice?
According to research, consumers dislike surcharges, and they can have a lasting negative impact on customer loyalty. Studies have found that 65-95% of customers who experience a surcharge are less likely to return to the business. In a dental practice, where trust and patient relationships are key, this could lead to increased attrition.
For example, if your practice spends $150-$300 to acquire a new patient and expects them to generate $4,500 in lifetime revenue, losing them over a 3% surcharge on a single transaction may not be worth it.
Additionally, many patients are unaware of merchant processing fees and may view surcharges as an unfair “penalty” for using their preferred payment method. If surcharges create even a slight barrier to treatment acceptance, they could cost a practice far more in lost revenue than they save in processing fees.
State Laws on Credit Card Surcharges
Before implementing a surcharge policy, it’s essential to ensure compliance with state laws. Regulations on credit card surcharges vary across the country, and in some states, it is outright illegal to pass these fees onto patients.
States Where Credit Card Surcharging Is Prohibited
- Connecticut: Businesses cannot impose surcharges on credit card transactions. However, they can offer cash discounts as long as the discount is clearly disclosed.
- Massachusetts: Surcharging is not allowed, but businesses can offer incentives for cash payments.
- Maine: Credit card surcharges are banned, but offering a discount for cash payments is permitted.
States with Surcharge Restrictions
In some states, surcharges are allowed but subject to specific limitations:
- California: Surcharging is generally prohibited, but recent legal challenges have created uncertainty about enforcement. Businesses should consult legal counsel before implementing a surcharge policy.
- Colorado: Surcharges are allowed but are capped at 2% of the transaction or the actual processing cost, whichever is lower. Businesses must clearly disclose the surcharge to customers.
- Florida: State law prohibits surcharging, but federal court rulings have declared the ban unconstitutional, leading to uncertainty in enforcement.
- Kansas: The state prohibits surcharges, but legal challenges have made enforcement unclear.
- New York: Businesses can impose surcharges but cannot exceed their actual processing costs. The total price, including any surcharge, must be disclosed before completing the transaction. (Source)
- Oklahoma & Texas: Surcharging is technically banned, but federal rulings have made enforcement questionable.
General Rules and Best Practices for All States
Even in states where surcharging is permitted, there are important legal and business considerations to keep in mind:
✔ Federal Surcharge Limit: The surcharge cannot exceed 4% of the total transaction amount, even if the business’s processing costs are higher.
✔ Disclosure Requirements: Businesses must clearly disclose any surcharges before a transaction is completed. This often includes:
- Posting notices at the point of sale.
- Providing a breakdown of charges on receipts.
✔ Debit & Prepaid Cards: It is illegal to impose surcharges on debit or prepaid card transactions, even if they are run as credit.
✔ Cash Discounts: A workaround to surcharging is offering a cash discount instead. This is legal in all states and often better received by patients.
The ADA’s Position on Credit Card Surcharges
The American Dental Association (ADA) has addressed the issue of surcharging and highlights the potential risks associated with the practice.
While there are no explicit bans from the ADA, they caution that surcharges may negatively impact patient relationships and should be carefully considered before implementation. Practices should weigh the potential cost savings against the risk of losing patient goodwill. (Source)
Alternatives to Surcharging: Smarter Ways to Handle Merchant Fees
If your practice is looking for ways to offset credit card fees without alienating patients, consider these alternatives:
1. Negotiate with Your Payment Processor
- Many businesses overpay for processing fees. Shop around or negotiate lower rates with your provider.
2. Implement a Cash Discount Program
- Instead of adding fees for credit card users, offer a small discount for those who pay with cash. This is legal in all states and often better received by patients.
3. Encourage Alternative Payment Methods
- Offer financing options, ACH transfers, or payment plans that reduce credit card processing costs.
4. Raise Fees Slightly Instead of Surcharging
- If processing fees are a significant burden, adjusting service pricing slightly can offset costs without an explicit surcharge, which patients might find less off-putting.
Final Thoughts: Proceed with Caution
As of this writing, the rules surrounding credit card surcharges remain complex and subject to change. Before implementing any surcharge policy, dental practices should:
✔ Check state laws to ensure compliance.
✔ Consult legal counsel to verify current regulations.
✔ Consider patient perception and the potential impact on retention.
✔ Explore alternative strategies that allow for cost recovery without alienating patients.
Surcharges may seem like an easy fix, but the long-term impact on your practice’s reputation and patient loyalty should be carefully weighed against any potential savings.
If you’re looking for ways to reduce credit card processing fees without losing patients over surcharges, we can help!
💰 Get a Complimentary Analysis of Your Merchant Fees!
Many dental practices are overpaying on credit card processing fees without even realizing it. Before passing those costs to patients, let’s see if there’s room to lower them!
📅 Click here to schedule a FREE 15-minute call and get a no-obligation analysis of your credit card fees:
👉 Schedule Your Complimentary Merchant Fee Review
Don’t let unnecessary fees eat into your profits—let’s find a better solution together! 🚀
#DentalBusiness #DentalPracticeManagement #DentistLife #DentalMarketing #DentalFinance #DentistryTips #MerchantFees #CreditCardProcessing #CreditCardSurcharge #PaymentProcessing #BusinessFinance #DentalBilling #SmallBusinessTips #BusinessGrowth #FinancialSuccess #LowerYourFees #PracticeProfitability
