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How Hidden Payment Processing Fees Affect Your Bottom Line · Orthodontic Products Podcast

• 0:04
  Alison Werner: Hello, and welcome to the orthodontic
• 0:05
  products podcast. I'm your host, Alison Warner. Today we're going
• 0:08
  to look at credit card processing fees specifically why
• 0:11
  you as small business owners need to understand the ins and
• 0:14
  outs of your credit card statements. The fact is
• 0:18
  these fees can not only affect your patient payment experience,
• 0:21
  but also your practice profitability. Joining me to
• 0:24
  talk about this is Eric Cohen, CEO and founder of Merchant
• 0:27
  Advocate a company that helps businesses get the best credit
• 0:30
  card processing fees and rates. This podcast is actually part of
• 0:34
  a four part article series that Eric has written for us and will
• 0:38
  be available on our website and go more in depth on these
• 0:40
  issues. But to get an overview, we have Eric with us today,
• 0:43
  Eric, thanks for joining me.
• 0:46
  Unknown: Yeah, thank you for having us, Alison. Great. So
• 0:50
  Alison Werner: to get started, can you tell our audience about
• 0:52
  what merchant advocate does?
• 0:57
  Unknown: Sure, so Merchant Advocate helps businesses reduce
• 1:01
  the cost of accepting credit cards, but without leaving their
• 1:05
  current processor, which is very, very important, especially
• 1:07
  in this industry. Our whole goal is, can we help the practice,
• 1:14
  eliminate any hidden fees, miscellaneous fees, things that
• 1:18
  should not be in their merchant statements, or increases
• 1:22
  whatever they may be that drives the cost up? And again, I think
• 1:26
  the most important thing is we do this all without a practice
• 1:29
  leaving their current processor.
• 1:32
  Alison Werner: Okay, so can you talk a little bit for those who
• 1:35
  aren't familiar how to credit card processing fees work within
• 1:39
  the orthodontic practice?
• 1:42
  Unknown: Yeah, so credit card processing fees? First of all,
• 1:45
  what everyone should know is the credit card processing world is
• 1:49
  unregulated. Okay, so there's three parts to it. There is the
• 1:53
  bank side, which is regulated there is Visa MasterCard, which
• 1:57
  has some rules. And American Express and Discover I just
• 2:00
  generalized Visa, MasterCard. But then there's the processing
• 2:03
  side that has no regulation. And what happens is the processors
• 2:08
  will take the hard cost, and they'll mark up the fees and
• 2:12
  send you a statement or actually don't even send you the
• 2:15
  statement. The statements are online. And they're cryptic,
• 2:17
  which means you don't know the fees are going up. You don't
• 2:20
  know what's real, you don't know this pure profit. Is it a visa
• 2:23
  fee? Is it not a visa fee? Very, very hard to decipher. It's
• 2:28
  almost like 10 times worse than a cell phone bill. And I know
• 2:32
  most of us don't understand our cell phone bills. And that's
• 2:36
  what's really important to understand is it's a foreign
• 2:39
  language. I always say that if you don't have a master's in
• 2:42
  Merchant Services, you're probably paying too much.
• 2:45
  Alison Werner: Okay, so then what are the types of fees or
• 2:49
  ways that practices are kind of being, you know, losing money or
• 2:54
  paying more to do business? So I know there's inflated processing
• 2:57
  fees? Let's maybe start there.
• 3:01
  Unknown: Yeah, so what's first of all, it's the fee is called
• 3:04
  your discount rate, which is surely not a discount. So it's
• 3:06
  kind of misleading, a little bit there. But there are hidden
• 3:10
  fees. So there are percentages, there are transactions, there
• 3:14
  are extra costs, especially with reoccurring billing. orthodontic
• 3:19
  is big for real reoccurring billing. There are penalties. So
• 3:24
  what we all know that when you don't have the card present,
• 3:27
  most of us understand that the fees are higher. But what most
• 3:31
  practices don't understand is there's also penalties if you're
• 3:34
  not set up correctly. Okay. And what we find in a single
• 3:38
  location or even multi locations is the credit card processors
• 3:42
  tend not to set up every account correctly. And it causes these
• 3:47
  penalty fees, or these miscellaneous fees. The other
• 3:51
  thing that we know about the industry is most practices are
• 3:54
  integrated into some sort of software, or practice management
• 3:58
  software. Now, the reason that's important is most of the time,
• 4:02
  you only have one choice of who your credit card processor is
• 4:05
  when you're in a software like this. And that's where we come
• 4:08
  in the credit card processors understand this. And one of the
• 4:13
  things that the way they make money is they will continue to
• 4:16
  raise the rates. Or they'll add a new line item, right? There
• 4:20
  are line items that appear to be real Visa, MasterCard fees,
• 4:24
  because it kind of sounds like a fee. And when you call customer
• 4:27
  service, unfortunately, the rep will say yeah, that's a real
• 4:30
  fee, when we know that they're actually petted. So very, very
• 4:35
  easy for the processors to do this because no one really
• 4:39
  understands these merchant statements and they kind of get
• 4:42
  away with it. Okay.
• 4:44
  Alison Werner: And then before we kind of get into how do they
• 4:47
  combat that. There's also an insurance angle here for how
• 4:51
  they could be seeing more fees or having more costs.
• 4:55
  Unknown: Yeah, so one of the things we've seen in the medical
• 4:58
  community in medical Dental is if you are taking insurance, we
• 5:03
  are seeing that insurance companies or third parties to
• 5:07
  insurance companies are now trying to remit payment for
• 5:10
  insurance via virtual credit card. And those virtual credit
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  cards last more than every other credit card that's out there.
• 5:18
  Now you don't have to take them, you could push back on an
• 5:21
  insurance company. But there are ways to reduce those cards. So
• 5:24
  it's really the insurance people or practices that take some sort
• 5:29
  of insurance and those companies that use third parties to remit
• 5:33
  payments, right, so you have to be really careful. And what we
• 5:38
  find is, practices will push back sometimes, but then all of
• 5:41
  a sudden, they start creeping up again and insurance companies.
• 5:44
  And when you think about it, these companies and their third
• 5:47
  parties, I mean, just like a consumer wants their miles and
• 5:50
  their points. They get miles and points every time they send you
• 5:53
  a card and use the card. Ah,
• 5:56
  Alison Werner: okay. Okay, so then what's the best way for an
• 5:59
  orthodontic practice to kind of find ways to save money on these
• 6:03
  credit card processing fees or combat these inflated fees?
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  Where should they start? Yeah.
• 6:09
  Unknown: Well, I mean, they should probably use a company
• 6:12
  like honesty, but yeah, without, you know, using a sales
• 6:16
  approach, or it's a, you know, I'm half joking there. But they
• 6:20
  really have to have their accounts monitored on a monthly
• 6:23
  basis, they have to have someone in the practice that understands
• 6:26
  the fees that understands the lingo that looks for, you know,
• 6:31
  penalties, even a penalty that that, you know, is easy to find
• 6:34
  is something called a non PCI fee. Right? You know, if you
• 6:38
  don't answer what's called a PCI survey, which is impossible to
• 6:42
  answer, because it's written in a foreign language, your fee
• 6:45
  could be as little as $10 a month, we've seen up to $500 a
• 6:48
  month in penalties, right. And the reason people use a company
• 6:53
  like ours out there is we understand the language, we have
• 6:58
  technology that reads these statements. And if you're not
• 7:01
  doing that on a monthly basis, if you're not checking them,
• 7:04
  your processor is going to start increasing the rates. Right? And
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  it's really about learning the lingo, but also learning the
• 7:11
  rules behind it. Right? Like, why would you get charged, for
• 7:16
  example, the non PCI fee, which are supposed to answer a survey
• 7:19
  once a year? Or why is there, you know, an extra penalty fee
• 7:23
  on one of your transactions? Right. So I think the easiest
• 7:28
  way for them to really monitor this is look at what their
• 7:33
  overall cost is. And a lot of times people are not looking at
• 7:36
  what their overall costs is. I mean, we have practices that
• 7:39
  will send their merchant statement. Well, first of all,
• 7:41
  we'll ask them to send a merchant statement, and they're
• 7:43
  like, where do we find them? Time? They don't know where to
• 7:47
  find them. Okay. But what's really important is, what is
• 7:51
  your overall costs? Right? What are you paying overall? Forget
• 7:55
  about all the details, what is that figure. And that's
• 7:58
  something to monitor as well as to make sure that that is
• 8:01
  consistent. Now, obviously, you want to get it as low as
• 8:03
  possible. And you can always call a processor and ask for
• 8:07
  lower fees. But again, if you don't understand the lingo,
• 8:10
  they're gonna lower one fee. And then the next month, they're
• 8:13
  gonna raise the fee back up somewhere else to make up for
• 8:16
  that. Okay.
• 8:18
  Alison Werner: Okay. So what are some best, you know, oh, let you
• 8:22
  keep going. Sorry.
• 8:24
  Unknown: Yeah, one of the things I was going to say is people are
• 8:26
  going to hear this and say, Well, what do you mean, I signed
• 8:29
  the contract? How could they raise fees? Well, the Visa
• 8:32
  MasterCard guidelines says that a processor can change rates,
• 8:35
  whenever they want to change the rates, as long as they give you
• 8:38
  30 days notice on the statement that most people don't look at
• 8:42
  and don't understand. So just because you signed up for fee
• 8:45
  doesn't mean that that's what you're gonna get long term,
• 8:48
  those fees can change as long as that process or gives you 30
• 8:52
  days notice.
• 8:54
  Alison Werner: Okay, so this is, you know, kind of a pay
• 9:00
  attention to those statements every month and read the, I
• 9:03
  guess, read the fine print, because I'm guessing this is in
• 9:05
  the fine print. What are some best practices? As you're
• 9:10
  setting up like, say you're a new practice and you're getting
• 9:13
  set up? What are some best practices to kind of help
• 9:17
  yourself at that point, and maybe avoid some of these extra
• 9:23
  costs? Yeah,
• 9:24
  Unknown: I mean, it's, it's really hard because when you're
• 9:27
  setting up a practice I was saying before, most practices
• 9:30
  are integrated into some sort of patient management system or
• 9:35
  patient billing system. And they don't really have a choice of
• 9:38
  what credit card company to use. So we think especially if you
• 9:42
  have reoccurring billing, I think the most important thing
• 9:44
  is find out who is using that company, maybe find a peer to
• 9:49
  choosing the company that has some low rates. Again, they
• 9:52
  could always call us if they choose to but you know, they
• 9:55
  want to go about it and find out, you know, before they buy a
• 9:59
  suit stuff, right? So it starts with the system they're going to
• 10:02
  use. So if it's a new practice, you want to try to find a EMR,
• 10:07
  right, that allows you to use more than one processor. And
• 10:11
  there's not many of them. But if you can't find that, you always
• 10:15
  you want to talk to someone that use the EMR, right? Because most
• 10:19
  of the EMRs out there will integrate the credit card
• 10:22
  processing. And once you're integrated, and have recurring
• 10:25
  billing, you're not unraveling it, you're stuck. Okay, so you
• 10:30
  really want to talk to some peers as well, what's the best
• 10:33
  system is the credit card processor, easy to deal with?
• 10:36
  And a, most of them are gonna say no, because a lot of them
• 10:39
  are very, very hard to deal with. And also, again, make sure
• 10:44
  that they have someone on staff that could monitor these
• 10:46
  accounts, or using a company to again, monitors the accounts,
• 10:51
  it's really, really important, because if you think about it,
• 10:54
  if you're paying 2% Too much, I'm not saying 2%. All in I'm
• 10:59
  saying if you're paying 2% Too much, that's on your gross
• 11:03
  sales, that could be five, six 10% of your net profit. That's
• 11:08
  being taken out. Right, so a lot of times we hear you know, I'm
• 11:14
  only paying an extra half a percent. But that's on your
• 11:17
  gross sales. What's that mean? Out of your bottom line?
• 11:22
  Alison Werner: Yeah, okay. Well, kind of extending from that is,
• 11:26
  one of the things you write about in the article series
• 11:28
  we're going to be putting on the website is about having good
• 11:32
  payment processing hygiene, when it comes to your practice
• 11:35
  valuation, especially when it comes time to sell or have some
• 11:38
  kind of transition. Can you talk a little bit more about that?
• 11:44
  Unknown: Yeah, so we're obviously seeing in the medical
• 11:46
  world, there's a lot of roll ups, there are a lot of sales
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  happening, a lot of private equity has come into the market.
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  And you know, we hear it in any medical, but we're seeing it in
• 11:55
  dental as well. You know, if you're overpaying, if you're a
• 11:59
  practice that, let's say is, you know, doing a couple, couple
• 12:03
  million dollars a year, right or million dollars a year, and
• 12:07
  you're gonna sell your company, or sell your practice, you're
• 12:10
  gonna get valued based off of EBIT, you're gonna get valued
• 12:14
  off of earnings, and maybe you'll get a five or a seven or
• 12:17
  10, I'm not really sure what the multiples are in your industry
• 12:20
  here. But if you lower the cost of your credit card processing,
• 12:25
  it's going to increase your overall valuation when you go to
• 12:28
  sell. So if you're in a spot today, where you're saying, You
• 12:32
  know what, I may exit in six months, or I may exit in two
• 12:35
  years, or maybe I'm getting towards the end of wanting to
• 12:38
  practice, right, there's a subset of practice, and doctors
• 12:42
  and dentists that know that that's coming. Yeah, they should
• 12:46
  clean up their merchant account as soon as possible. Right,
• 12:50
  because if they say, for example, if they save, I don't
• 12:53
  know, $30,000 a year, that can mean a couple $100,000 in
• 12:59
  increased valuation, when they go to sell their practice. Right
• 13:03
  now, the PE firms and the people buying them understand this,
• 13:08
  right? They understand that if they look at something, some of
• 13:12
  them are smart enough to know, oh, we could reduce the credit
• 13:15
  card service, right. And the reason I know this is we work
• 13:17
  with a couple of these firms that look at this and have due
• 13:21
  diligence before buying some right and seeing if there's
• 13:25
  value there. But if you're, you know, if you own the practice,
• 13:30
  you want to look at all of your contracts. But this is one that
• 13:34
  I would say 90 plus percent of your revenue is probably credit
• 13:37
  cards in today's world. Yeah, this is one of those easy fixes.
• 13:41
  That is not let's say 500 a month, it's let's increase your
• 13:44
  value by 234 $100,000 when you're going to exit, so I think
• 13:48
  that anyone that has in that mind frame, whether it's six
• 13:52
  months or a couple years or something coming up, this is an
• 13:55
  area to really look at. Absolutely. Okay. Well,
• 13:59
  Alison Werner: before we wrap up, is there any like last words
• 14:03
  you have for our audience in terms of what they should be
• 14:07
  thinking about in terms of saving themselves? These costs?
• 14:13
  Unknown: Yeah, I think one of the best pieces of advice is,
• 14:17
  you know, we you all need to accept credit cards, there's no
• 14:20
  question about that. The credit card salesperson that's selling
• 14:24
  is not your friend. Okay? The way the credit card industry
• 14:27
  works is, the salesperson in the company earns a percentage of
• 14:31
  every transaction, the more they charge you, the more money
• 14:35
  they're going to make every month. So you really have to
• 14:38
  scrutinize those relationships, especially when we're talking
• 14:42
  about new practices. Very, very, very important. You also want to
• 14:46
  make sure that you're not getting these penalties or
• 14:48
  you're not getting, you know, a semi annual fee or, you know,
• 14:52
  we've even seen things in in this industry where there's a
• 14:56
  line item for some service that is let's say A reputation
• 15:01
  management service that the credit card processors resell.
• 15:05
  And they bill you for it, but you don't even know about it.
• 15:07
  You don't even know how it works. So it's really, really
• 15:10
  important for every line item to be scrutinized on this thing.
• 15:14
  And, you know, you said us good hygiene. I mean, that's kind of
• 15:18
  a perfect way of saying it. This is one of those areas that it's
• 15:21
  very easy for people to take more money than they should. And
• 15:27
  again, that's why we exist, I think. Yeah, merchant Africa was
• 15:32
  created for transparency and really helping the business
• 15:35
  owner and not get, you know, taken advantage of by these
• 15:40
  large processors. That's why the company exists today. Yeah.
• 15:45
  Well,
• 15:45
  Alison Werner: and it just seems like, you know, most a lot of
• 15:47
  orthodontic practices that are, you know, the private ones.
• 15:50
  They're small businesses. And so like you said, they're the small
• 15:54
  fish and of working with a very big pond. So with the credit
• 15:58
  card processing big companies, so yeah, absolutely. Well, Eric,
• 16:02
  thank you so much. Thank you so much for speaking with me today.
• 16:06
  And you can find Eric's four part series that he wrote for us
• 16:10
  on our website. And if you want to learn more about merchant
• 16:13
  advocate, merchant advocate.com is the website.
• 16:18
  Unknown: Yes, no. SS just merchant advocate.com.
• 16:23
  Alison Werner: All right. Well, thank you, Eric. I appreciate
• 16:24
  it.
• 16:27
  Unknown: Thank you for having us. Awesome. Great.
• 16:29
  Alison Werner: As always, thank you for joining us. Be sure to
• 16:31
  subscribe to the orthodontic products podcast to keep up with
• 16:34
  the latest episodes. And be sure to check out orthodontic
• 16:36
  products online.com to keep up with the latest industry news.
• 16:39
  Until next time, take care