What You Need to Know About Merchant Services

The term “merchant services” might make you shrug, shriek or roll your eyes.

Regardless of how you perceive it, merchant services—or credit card processing—has become a necessary staple for most medical practices today. Yet there is still a great deal of confusion as to exactly what fees your processor is currently charging you. There are certain fees that will increase your overall cost of credit card acceptance, and a set of questions you should include when reviewing a new merchant services provider.

It’s wise to review merchant statements monthly, or at least quarterly. You should also know what your rates are today versus what they were when you signed the contract. Processors can increase rates up to twice a year, typically in April or October (or both), as long as they give you 30 to 60 days’ notice. The notice will be on your statement and say something to the effect of “Continuing your merchant account with us or use of your merchant account after thirty (30) days will signify your acceptance of the above terms.”

This is a good time to consider switching providers. You may be able to opt-out of your contract during this period due to the modification of the original agreement terms.

Rates are not the be-all-end-all to your overall costs. Merchant accounts have myriad charges listed. Some can’t be avoided, and others are superfluous. If you see these fees, contact your agent or processor to ask how to get them removed or switch to another company.

Here are some examples of avoidable fees.

• PCI non-compliance fee. This takes a little work on your end to get compliant, but don’t delay. It’s a costly monthly fee that can easily be removed if you take the proper steps.
• Monthly PCI compliance. We still haven’t figured out why processors will charge a monthly PCI Compliance fee. Most processors will charge an annual fee, which is typically unavoidable. But the annual fee should encompass all PCI-related charges for the year as long as you maintain compliance.
• Breach or data security fee. Most MedMal and BOP insurance policies give base coverage for a data breach, but we advise to review a cyber liability policy to better protect the practice. Don’t rely on a merchant services breach policy to protect the practice.
• Daily versus monthly billing, settlement or clearing fee, network access fee. These are just junk fees.
• American Express SHOULD be the same rate as the other card brands. AMEX’s new pricing structure (OptBlue) allows for the processor to set the AMEX Rate rather than the card brand. If yours is higher than your VISA/MC/Discover rate, then the processor is making more money on your AMEX transactions.
• Visa or MasterCard interchange adjustment fee. Interchange fees are legitimate and set by the card brands; but if you see an “adjustment fee,” that’s just a sneaky way to get more money.
• Paper statement fee. Sometimes this will be listed as a customer service fee. You’ll typically have one or the other, but you shouldn’t see both.
• Equipment fee. You hopefully aren’t leasing equipment, which is extremely costly and unnecessary. New equipment isn’t that expensive and should be a one-time cost.

There are many more fees in existence, and we are seeing new and creatively worded ones crop up every month.

Every processor or bank in the nation must comply by the rules set forth by the payment card industry. Remember this when it’s time to make a change to your merchant services provider! Data-security and compliance requirements will be fairly uniform. The factors that distinguish one processor from another will be its employees, the company’s transparency level, the services it offers, and its access to technology.

Finding a vendor who understands the needs and operations of a healthcare practice will offer a better experience with that company than those who do not have this expertise. This includes the salespeople, customer service representatives, managers and technical support teams.

Here are a few points to get answered, preferably in writing, when you are exploring merchant services companies:

Contract length. A normal contract lasts for three years, which is OK if they don’t have any ETFs. Be sure to ask if the contract will automatically renew; and if so, what kind of notice you need to provide to opt-out of that renewal.

Early termination fee or penalty. Red flag! You shouldn’t have to pay the processor to leave them.

• Funding time. It should be either next-day or the following day, never longer.
• Online reporting capabilities and cost. Processors should provide this free of charge.
• Fee debit schedule. You want monthly debits of your fees, not daily, and you shouldn’t be surcharged for it.
• Rate guarantees. Don’t fall for teaser rates that rise after a short window of time.
• Pricing guarantees. This includes the authorization fees per transaction, and any other monthly fees outside of the rate they are offering.
• Set-up or application fees. There should be zero.
• Monthly minimums. Again, these should not exist.

Vendor reputation. Do they have a reputable vendor to help you with PCI compliance? Can you do it online?

HIPAA protection. Do they know or at least understand what information is HIPAA Protected?

Customer service contact. Most salespeople in merchant services either only work in sales (not service), or they will be gone within 18 months, and you will be left to rely on service representatives whom you have never met or heard of previously for help.

• References. Do they have any healthcare references to provide that can vouch for their service?

The ultimate goal of choosing a credit card processor is to be satisfied that they understand and meet your needs and do so at the right price. Think of the relationship as more of a partnership than a way to get the cheapest rate. No, your rates and fees shouldn’t be exorbitant; but good, reliable service has value. Do your research up-front so that you can be confident you’re choosing a vendor who will serve as an integral part of your practice’s operations and help increase your revenue while keeping costs to a minimum.