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Fellow dental professionals,

As the founder of Archy, and together with my co-founders Ben Kolin and Nimish Sheth, we bring over 30 years of combined payments experience to the table. Notably, we had a hand in building Uber’s payment platform, enabling seamless transactions worldwide. We understand how the complexities of financial systems can affect businesses—particularly in the healthcare sector.

In the dental industry, where we are often involved in intricate transactions with patients, insurance companies, and payment service providers, understanding different types of fees becomes a necessity, not a choice. Unfortunately, many businesses, even within our own community, blur the lines, often hiding bad practices under the veil of complex financial terminologies. Today, we’re deciphering the subtleties between payment surcharges, convenience fees, and service fees, shining a light on these practices to ensure we maintain our professional standards of transparency and integrity.

Payment Surcharges

Payment surcharges are additional charges that a business may add when a customer chooses to use a certain payment method, usually to counterbalance transaction fees. This practice can be controversial and is often seen as a hidden fee. However, if a business decides to add a surcharge, they must follow guidelines by card networks and local laws, clearly displaying these surcharges to customers.

Convenience Fees

Convenience fees are charges added for the benefit of paying for a product or service through an alternative payment channel. Some businesses exploit this by charging excessive convenience fees under the guise of providing additional payment options, while their true motive may be to offset card processing fees.

Service Fees

Service fees refer to any charge for an extra service provided. It’s unethical to disguise what would traditionally be a surcharge or convenience fee as a service fee.

Cash Discounts

In addition to surcharges, convenience fees, and service fees, there’s another payment-related concept that we, as dental professionals, should be aware of—cash discounts. Cash discounts are reductions in price offered to customers who pay by cash, check, or other non-credit methods.

Offering a cash discount is a practice that encourages cash transactions over credit or debit card transactions, helping to save on card processing fees. Unlike surcharges or convenience fees, which can be viewed negatively as they add to the total cost, cash discounts create a positive impression as they reduce the amount payable by the patient. However, it’s crucial to clearly communicate the terms of the cash discount to your patients and ensure your discount program is not a disguised surcharge program.

Understanding the Regulations

The regulations surrounding these fees vary significantly by state and card network (e.g. Visa, MasterCard, Amex). For instance, ten states prohibit surcharging altogether, while others regulate how much can be charged and how these charges should be disclosed.

The major card networks each have their own regulations regarding surcharges and limit the surcharge amount. They require businesses to provide clear notifications to consumers when a surcharge is being added.

Risks of Non-compliance and Universal Prohibitions

The risks associated with charging these fees in a non-compliant manner can be significant. All credit card networks prohibit the charging of surcharges on debit or prepaid cards, and doing so can have serious consequences. Not only can a network (e.g. Visa, MasterCard) terminate your ability to accept card payments, but the penalties for non-compliance can be severe. In states where surcharges are prohibited, the fines can range from up to $1,000 per occurrence of non-compliant surcharge charges, increasing to $5,000, $10,000, and even $25,000 per occurrence for repeated violations. As such, it’s crucial to understand the rules and regulations surrounding surcharges and convenience fees, and ensure that you are in compliance to avoid costly penalties.

A Call for Transparency and Compliance

At the core of all these fees is transparency—or a lack thereof. We, as dental professionals, must keep our billing processes transparent and honest. As we navigate the complexities of business ownership and management, let’s remember that our practices are built on trust. We owe it to our patients to remain fair and transparent, always keeping their best interests at the forefront of what we do.

While we have financial obligations, we also have an ethical duty to our patients. Striking a balance between financial viability and patient trust is critical in our profession. We owe it to ourselves and to patients to remain upfront about our fees, ensuring that no one feels deceived or taken advantage of.

How To Stay Compliant and Avoid Trouble

Surcharge Rules:

In the U.S, dentists that plan to implement a surcharge program must do the following to stay compliant:

Notify Visa and MasterCard if you accept payments from them, and your acquirer at least 30 days in advance of beginning to surcharge; A notification form can be submitted at:
Visa: www.visa.com/merchantsurcharging.

Mastercard: https://www.mastercard.us/en-us/surcharge-disclosure-webform.html
Discover: No Notification Required
American Express: No Notification Required
Limit the amount of the surcharge to the cost of your credit card transaction fee, the surcharge cannot exceed the cost of processing. You cannot use the surcharge to make money. Every card network prohibits charging more than the cost of transaction processing fees.
Discover, MasterCard, and American Express do not allow charging different amounts for different card networks. On the other hand, while Visa does not have a similar prohibition, it’s still important to note that merchants should not charge more than the actual cost of the transaction fees as that would run afoul of their rules.
IMPORTANT: American Express fees are typically higher than other networks. Keep this in mind when applying a transaction fee, as you may not be able to recoup the full cost of an American Express transaction while staying compliant with rules of all of the other card networks.
Charging both a convenience fee and a surcharge fee is not allowed. Practices are only permitted to charge one or the other.
Disclose the surcharge as a merchant fee and clearly alert consumers to the practice at the point of sale – both in store and online – and on every receipt. The surcharge must be itemized on the receipt. Every card network requires disclosure of surcharge.

Convenience Fee Rules:

While information regarding convenience fee rules for the four main card networks can be less clear and readily available than rules for surcharges, there are still best practices to ensure compliance with all providers. After reviewing all available guidance, we’ve compiled the best practices for ensuring compliance with all credit card providers regarding convenience fee rules. By following these best practices, practices can ensure they are adhering to the proper protocols for convenience fees, avoiding penalties, and maintaining positive relationships with customers and card networks.

Disclose: Clearly disclose the convenience fee before completion of the transaction to your patients, and disclose the alternative options available to them. It’s not required by all providers, but it’s best practice to itemize the convenience fee on the receipt.
Consistent Fees For All Card Networks: The fee charged for an individual alternative payment channel must be consistent. For example, if you are going to charge for online payments with a credit card, every credit card brand must have the same fee associated with the transaction. Discover, MasterCard, and American Express prohibit charging different fees for different card networks.
Flat Fixed Fee: The convenience fee can only be a flat, fixed amount. You cannot charge a percentage of the transaction, or a tiered pricing structure.
Visa only allows a flat fixed rate for convenience fees and prohibits the use of tiered or percentage-based fees. On the other hand, MasterCard, Discover, and American Express allow charging a percentage of the transaction. However, these networks have rules prohibiting charging different fee amounts for different networks. As such, if you plan to accept Visa cards, you can only use a fixed flat rate convenience fee for all other networks.
No Card Network Notification: Unlike a surcharge fee, you are NOT required to notify the card network, or acquirer if you are planning to implement a convenience fee program.
Recurring Transactions: Visa does not allow you to charge convenience fees on recurring transactions such as a membership plan. Discover, MasterCard, and American Express do not have prohibitions on a convenience fee for recurring transactions.
One Fee: Charging both a convenience fee and a surcharge fee is not allowed. Practices are only permitted to charge one or the other.
Must Be a True Alternative Channel: A convenience fee can only be charged on a bona fide alternative channel. For instance, charging a convenience fee for in-person credit card payments, which is a typical payment channel, is not permitted. However, if alternative payment methods such as online, phone, or mobile payments are offered, a convenience fee may be charged on those channels as they are considered alternative channels.

5 Questions to ask your payment provider to ensure you are in compliance

Improperly using surcharges or convenience fees can result in steep fines and penalties, and may even prevent businesses from accepting credit card payments. To avoid non-compliance, it’s important to ask your payment processor the right questions. Below are 5 key questions to ask, along with their corresponding answers to ensure compliance and avoid costly penalties. Depending on how your payment processor answers these questions, it may be time for you to reassess who is processing your payments.

Is it legal in my state to charge a surcharge?

Surcharging is illegal in Connecticut, Maine, Massachusetts, and Oklahoma, regardless of the circumstances. Payment processors may attempt to charge a “convenience fee” on ALL credit card transactions as a workaround, but this is not a legal solution and can result in significant fines and the risk of being removed from card networks, ultimately leading to the inability to process credit cards. A convenience fee cannot be charged on the primary means of payment, which credit card is at most practices. Although some of these states may allow charging convenience fees, it is not legal to use them as a means to charge what is effectively a surcharge.

Can you provide a breakdown of all the fees associated with my payment processing services, including convenience fees and surcharges?

Exceeding the cost of processing the transaction with a convenience fee is a violation of Visa, American Express, and Discover guidelines on surcharges. If the total costs provided by your payment processor exceed the cost of processing the transaction, you may not be in compliance with the rules. Additionally, if the fee charged to the patient exceeds 4% of the total transaction, it is a violation of Mastercard’s guidelines on the maximum amount that can be charged for surcharge and convenience fees.

Are there any types of transactions, such as debit or prepaid cards, that I am not allowed to charge a convenience fee or surcharge on?

Major credit card networks prohibit surcharging on debit or prepaid card transactions, while the rules surrounding charging convenience fees on these types of transactions are a bit less clear. Visa specifically prohibits charging convenience fees on debit and prepaid cards, while Mastercard, Discover, and American Express allow convenience fees on debit or prepaid cards used in an alternative payment channel. However, it’s important to ensure that any convenience fee charged is not a disguised surcharge, as outlined in our earlier section on convenience fees. In practice, this means that businesses cannot charge a convenience fee on all debit card transactions while accepting all four major card networks.

Are there any credit card networks with different rules than others regarding convenience fees and surcharges?

Yes, each of the major credit card networks has its own specific guidelines and rules when it comes to convenience fees and surcharges. For instance, Visa prohibits surcharging on all debit card transactions. Meanwhile, Mastercard, Discover, and American Express allow convenience fees, but have specific rules surrounding the amount that can be charged and the types of transactions on which a convenience fee can be charged.

It’s important to review the guidelines and regulations for each card network to ensure that your business is in compliance. Failure to comply with these rules can result in steep fines and the risk of being removed from the card networks, ultimately leading to the inability to process credit cards.

How do I ensure I am properly disclosing convenience fees and surcharges to my customers?

Properly disclosing convenience fees and surcharges to customers is crucial to ensure compliance with card network rules, and avoid any confusion or misunderstandings. The specific requirements for disclosure may vary depending on the state or card network, so it’s important to review the guidelines and regulations for your specific situation.

Some best practices for disclosing convenience fees and surcharges to customers include prominently displaying the fee on signage or at the point of sale along with any fee-free alternatives, disclosing the fee in writing on the receipt or invoice, and verbally informing the customer of the fee before completing the transaction. It’s essential to ensure that the fee is clearly and accurately communicated to customers in an easily understandable way.

The Archy Advantage

We hope that this guide has been informative and valuable to you. Implementing a convenience fee or surcharge program can be an effective way to increase profits and reduce costs, potentially saving your practice on payment processing fees. However, it’s important to consider how your patients will perceive such a program and to ensure that you are in compliance with state and card network regulations.

At Archy, we understand these complexities and the need for clarity and compliance. That’s why we offer both in-person and online payment services that comply with all relevant regulations, ensuring a seamless, transparent, and fair payment process for your patients.

In the end, financial transparency isn’t just good ethics—it’s good business. Let’s strive to lead by example and create a better, more honest dental industry.

Until next time, keep smiling!

Demystifying Payments Surcharges, Convenience Fees, Service Fees, and Cash Discounts