Credit card conundrum – to accept or not to accept?

A colleague of mine posed the question, “what are some alternative options in regards to processing credit card payments?  Most of my patients pay with credit cards and I’m trying to minimize costs.”

I can absolutely empathize.  In fact, I was asking the same question a little over a year ago.  As a former Licensed Massage Therapist (LMT) with a private practice based out of a home studio, my clients didn’t expect me to be set up to accept credit cards and they were happy to pay by cash or check.

And I enjoyed the the simplicity and reduced overhead of not having to deal with Visa or Mastercard.  No contracts, no reports, no percentages, no hidden fees, no terminals, no chargebacks, no nothing.  It was lovely.  But…

When we opened our chiropractic and alternative medical office, we began to revisit the idea of accepting credit cards.  It seemed of only marginal importance; we informed our first patients over the phone that we were only set up to take cash or check at this time and everyone seemed quite receptive to that.  They understood and empathized with us wishing to minimize costs and they knew how credit card companies could be.  They wanted to help us keep our costs low and they were quite content to plan ahead, bringing their checkbook or cash.

Then, during a conversation with our mentor, whom we had long admired for several reasons, among them being his knack for profitability and thrift.  He actually advocated accepting the cards, without any hesitation.  His motto: “make it easy for people to pay you.”

Okay, that did it.  The next day, we were on the phone with multiple people who dealt in credit card/merchant services.  And believe me, once you let this genie out of the bottle, there is no putting it back in; there is absolutely no shortage of salespeople who want to sign you up with their merchant services company.  So, we had several options to choose from.

First, in case you’re thinking about PayPal or some other similar service, I highly recommend steering clear of PayPal entirely.  There are hundreds if not thousands of horror stories of frozen accounts, unaccessible funds, lost revenue/income, exorbitant fees, math errors, privacy breaches, unfair practices, and even practices that would be illegal for a bank (but are not illegal for PayPal, since they’re not technically considered a bank by law).  So, stay away.  Moving on…

After a year in this clinic, I can unequivocally suggest accepting credit cards – at least, the two majors: Visa and Mastercard.  I also highly, highly suggest doing your homework when choosing a credit card vendor.  Why?  One enormous reason is because your costs vary greatly from company to company.  Another reason is that there is usually a contract involved (yes, a binding one, and they can extend for long periods of time), and not all contracts are created equal by a long shot.

Things to consider:

  • Which cards you’ll accept – Visa and Mastercard are “musts”, Discover less so (but I would consider it anyway).  I would forget American Express; yes, it’s the first one people pull out because it usually has rewards and whatnot, but nobody actually expects you to take it.  They usually have another non-rewards (cheaper for you) card they’re not talking about.
  • Your terminal – type/configuration, quality, reliability, features, and cost.  You’ll be using this every day; get one you like.  Some do credit only, some will do debit also (you may need a keypad), some will process checks.  Some will process only personal checks; others process business checks too.  Some work with internet, some with phone.  Do you want to tie up your phone line?  Pay for a second phone line dedicated only to credit card processing?  Do you want to use your internet connection (I recommend broadband for this operation; dial-up won’t cut it)?
  • Costs – what are your monthly minimums, and do you consistently have enough volume to meet them?  What is the pricing structure on the various tiers (see below)?  Costs vary A LOT from company to company.  Do your homework!
  • Contract – is there one?  How friendly?  How long?  How to terminate if necessary?  Early termination fees?  Circumstances beyond your control (let’s say, oh, your state scope of practice changes and you have to move out of state)?  Transferability?
  • Merchant bank account – when processing credit/debit/electronic check/etc payments, you’ve got to set up a bank account of some type, so that they incoming revenue has somewhere to go.  Some credit card services have banks they may prefer or already be set up with or associated with, but usually you can shop around and pick any bank you want.  We now have ours routed to a credit union account instead of a bank.  If you’ve never had a business bank account before, be prepared: there are usually more fees and strings attached than there is for the consumer “free checking” accounts.  It’s not much more, but these fees can add up, so shop around, because here again, not all are created equal.
  • Online processing – maybe you don’t want a terminal and you’d rather do everything online.  Some patients see no problem with this; others are more comfortable seeing the physical terminal/keypad, as that’s what they’re used to.  I admit, online processing is more suited to particular professionals such as massage therapists or mobile doctors or others who provide services primarily outside of a stationary location.  If you have a brick-and-mortar clinic and your patients come to you rather than you going to them, it might appear more professional to have a physical terminal.

Evaluating credit card processing companies…

When meeting with the sales reps from these companies, there is A LOT they won’t tell you.  They may have some low teaser percentage rate, but watch out!  It often applies to the very lowest tier and they make it up with much higher prices on the other tiers.

And they won’t tell you about the tiers, either.  We were lucky enough to have one rep who DID, and she came out and said (paraphrased), “here are the three tiers and here are the percentages associated with each tier.  You’re free to shop around; always ask them what ALL their tiers are, because they won’t ever tell you about this otherwise.”

Here is a little crash course on said tiers:

  • Tier 1 – regular card (no “rewards” cards), physical swipe with a signature obtained (no manual key-in)
  • Tier 2 – most “rewards” cards (the ones with perks, air miles, cash back rebates, etc), OR manually keyed-in data (with no swipe/signature), such as orders over the phone, etc.
  • Tier 3 – most business/corporate cards, as well as untimely/delayed “batch-out” (some machines do this automatically so you don’t have to worry about this; other machines don’t and you must batch out yourself)

The tiers are progressive in cost; Tier 1 is cheapest, Tier 3 is the most expensive.  Usually when they say, “only 1.71%!!!!” they are referring to Tier 1 only, and will gouge you on Tiers 2 and 3.

Just a note: You’re still on the hook for all the terms ultimately agreed upon in the contract, but the rep is there to make a sale, to get you IN to that contract.  As far as they’re concerned, you can read it later…after you sign it.  That is ass-backwards and it is up to you to push back.  You may (and often do) have to do just that.

Also make sure you get a good quality machine.  Ours does Visa, Mastercard, Discover, (it will do AmEx, too, but we simply don’t accept them), personal checks, business checks (for a small extra fee–well worth it!), and debit (we got the extra keypad should people wish to enter their PIN).  It’s high-quality, durable, and reliable.  The better machines and services will also run your checks through the Telecheck system; although this method incurs the same costs as processing credit cards, you are also protected in the event that the check bounces.  You still receive your money and you are not penalized a bounced check fee, either.  You can also be given a heads-up to ask for another form of payment should the patient attempting to write the check already be flagged in the system for having written bad (bounced) checks before.

As I told my colleagues, really, really shop around for this stuff.  In the end, they’re going to make their money (wouldn’t you?) but you can avoid getting raked over the coals. Beware of low teaser rates, because there’s always something they’re not telling you. In fact, we had one rep flat out LIE to us when he came in with his “I can get you into 1.75%” and we said, “really? Great! So what are the Tier 2 rates?” and he just went “huh?” and looked at us as if to say “crap, you KNOW about that stuff…” , and when we pressed on, “you know, the rewards cards and such”, he regained his composure and had the gall to say, “oh, don’t worry about those. Hardly anybody uses those.” HA! (We had met with our bank the week before about setting up a merchant account and when our bank rep told us about the tethered credit cards we could get, we had 5 options to choose from and ALL were reward cards!!) So we knew this guy was a lying sack of dung and we booted him out of the office. PS: Don’t be afraid to do that, either. Remember – by meeting with these snakes you’re indeed doing THEM a favor; don’t be afraid to rescind that favor and end that meeting if it’s not going to benefit you!

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