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Thursday, July 05, 2007

On credit card processors

We take credit cards. I know that seems trivial, but for a while, over a year, I did not take plastic. I did have a good rationale for not accepting credit cards, namely because of the transaction fees. But then something started to happen that pushed me over the edge. Patients at an increasing number were not carrying around cash and could not pay the co-pays. They would ultimately pay upon receiving the mailed statement, but they were not paying at the time of service. So I evolved.

In order to accept credit cards in your practice, you must have a credit card processing unit and a merchant account with one of the processing companies. I happen to use care credit, but many people I know and trust, use ACCPC. Setting up an account is easy. All you do is call their toll free numbers, purchase a processor (typically in the $300 to $500 range, and negotiable), fill out the application, send them a voided bank check for direct deposit, and voila, you're up and running. You will need a separate phone line dedicated just for the processor, despite what others may tell you. Processors don't function well over a splitter.

The processing companies take transaction fees, which is how they make their money. Transaction fees range from 1.5% to 3% and vary for a number of reasons. Some companies are just more expensive than others, but some credit cards exact higher transaction fees than others. Have you ever wondered from where the money comes to fund rewards for purchases or for college 529 plan cards? The merchants--me, you, the pizza guy--we fund those rewards programs via higher tranaction fees. VISA and Mastercard have variable rate fees. AMEX always charges a flat 3%. Sounds like a scam, right.

Well, yes and no. When I have to send my biller to collect on un-paid co-pays via repeated mail and phone call attempts, I pay much more than 3% of the value of the co-pay. I pay $18 per hour, not including taxes, plus postage and envelopes. In addition, un-collected co-pays adds to accounts receivable, and negatively impacts cash-flow.

Since I have started using credit cards, my cash flow has improved and my ability to collect co-pays, some of which are in the $50 range, has improved. Live and learn, but I wish I took the cards from the beginning. Who knew?

Thanks for listening.

The IU.