By President of Best Card Phil Nieto
The Cost of Attracting and Retaining Patients
Before deciding to surcharge, it’s essential to understand the cost of attracting new patients and the value they bring to your practice. On average, dental offices spend between $150 and $300 per patient acquired on marketing. Additionally, dental practices face a patient attrition rate of approximately 17%, which means they must consistently attract new patients just to maintain their current numbers. Given that the average patient generates around $4,500 in revenue over their lifetime within the practice, retaining loyal patients is crucial for sustained growth.
The financial risk of surcharging becomes more apparent when considering these numbers. Nationwide, dental practices process an average of about $250 in transactions. Under a 3% surcharge model, the fee for a $250 payment is $10, which the patient pays. Although this saves the practice on processing costs, that additional $10 fee can be enough to motivate patients to seek services elsewhere. Research shows that over 60% of customers are less likely to return to a business that imposes surcharges.
For dental practices, this can be particularly damaging. Consider a practice that invested $150 to$300 to attract a new patient and expects to earn $4,500 over the course of that patient’s relationship with the practice. Losing that patient due to a $10 surcharge represents a significant financial loss. While surcharging increases profits for credit card processors, it may come at the expense of patient loyalty and long-term revenue.
Why Many Dental Practices Avoid Surcharging
Surcharging may initially seem like a convenient way to offset processing fees, but the long-term implications can be far-reaching. Patients generally dislike surcharges. Studies indicate that between 65% and 95% of customers are less likely to revisit a business after being surcharged. In the competitive dental industry, where patient loyalty is crucial, such high rates of customer dissatisfaction can significantly impact a practice’s growth and sustainability.
Moreover, the cost savings are not always as beneficial as they appear. Most surcharge programs require dental practices to pay a flat monthly fee, typically $40 or more, while patients are charged an additional 3-4% on their transactions. This model effectively shifts processing fees to the patient, but at the potential cost to the practice’s reputation and patient retention rates.
An additional complication arises with Virtual Credit Cards (VCCs), which are increasingly issued by insurance companies. These cards are programmed with an exact balance and will decline if a surcharge is added. Since industry regulations require that all credit cards be surcharged if any are surcharged, practices would have to lower service fees to accommodate the VCC’s exact balance, effectively absorbing the surcharge cost themselves. Even more concerning, the reported surcharge can trigger audits from insurance companies, potentially leading to reduced reimbursement rates for procedures.
Many dental practices find that increasing prices by a modest percentage — without adding a separate surcharge — is a better way to offset rising operational costs. This strategy allows practices to maintain transparency with their patients while avoiding the negative perceptions associated with surcharges.
Navigating the Complexities of Surcharging
For practices that still wish to explore surcharging, navigating the complex regulations is crucial. Visa, Mastercard, Discover and American Express each have strict guidelines that must be followed. If a practice decides to surcharge any credit cards, it must surcharge all credit cards, maintaining consistency across all transactions. However, debit cards cannot be surcharged under any circumstances, which adds another layer of complexity.
Additionally, businesses cannot surcharge customers in states where surcharging is illegal, even if the practice is located in a state where it is permitted. Surcharges are also capped at the average processing fees paid over the past quarter, up to 3% for Visa and 4% for the other card brands. This is why many processors default to a flat 3% rate. These rules apply regardless of how the surcharge is labeled—whether as a “Cash Discount” or otherwise – any additional fee added based on the type of card needs to comply with card brand regulations, state and federal laws.
Surcharging requires careful consideration, strict adherence to regulations and transparent communication with patients. The potential cost savings must be weighed against the risks of losing patient loyalty and damaging the practice’s reputation.
The Bottom Line: Is Surcharging Worth It?
While surcharging may offer short-term cost savings on credit card processing fees, it also carries significant risks. Patient dissatisfaction, complicated insurance regulations and strict compliance requirements make surcharging a potentially risky strategy for dental practices. In an industry built on trust and patient loyalty, maintaining transparent and predictable pricing is often a better approach.
At Best Card, we understand the complexities involved in credit card processing. When Best Card sets your business up for surcharging, we will make sure you are compliant with all regulations. Our focus is on offering consistently low rates and transparent processing, whether surcharging or using traditional pricing.
For more information, visit BestCardTeam.com or call 877.739.3952.
Phil Nieto is the President of Best Card, the endorsed credit card processor of more than 50 dental medical associations and ADA Member Advantage. He enjoys working with thousands of dental offices to help minimize the headaches of accepting card payments by focusing on providing what the merchant services industry often lacks: innovation and integrity. On the rare opportunities for a quiet moment, he loves spending time with his wife and kids.
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