An average medical practice can expect its overhead cost to be around 60%. More patients are having to pay high deductibles when visiting their doctors instead of the insurance company paying a majority of the service cost. Having patients pay for more of the service results in late payments or no payment at all. Not only is there the threat of no payment, but the cost of things like rent, electricity, and supplies are also rising. Unlike other services that can pass the cost down to customers, medical businesses are left having to pay for overhead costs with no increase in revenue. Doctors, surgeons, and dentists everywhere across the U.S are being forced to figure out ways to deal with this situation. Of course, there are things you can do to attempt to negate the effects of increasing overhead costs. Making sure your staff is working productively, cutting salaries, and tweaking employee benefits help to reduce expenses, but one area you may have overlooked is your businesses’ merchant services. Could your merchant service provider be overcharging you by hundreds?
How to calculate how much you are being charged
Figuring out your effective rate will reveal whether or not your merchant service provider is overcharging you. The effective rate is the total amount your merchant service provider is charging you for credit card processing. Dividing the total processing fee by the Total sales volume on your credit card processing statement and then multiplying that number by 100 will tell you how much your effective rate is. Total sales volume/ Total sales X 100. Next, you will want to compare your effective rate to your interchanged rate. The interchange rate is the wholesale rate of credit card processing. Average interchange fees:
Visa – 1.45% to 2.4 %
Mastercard – 1.55% to 2.6%
Discover – 1.56 to 2.6
American Express – 2.5 to 3.5%
If your merchant is charging you around 5% then you could be overpaying.
Merchant Services Products
The cost of merchant services can vary depending on your business needs. Requiring credit card terminals, accepting recurring payments, accepting payments in a variety of manners, and requiring 24/7 support, are all things that may require a higher cost plan. Merchant service products can be broken down into several types.
Tiered pricing- With tiered pricing payments are broken down into 3 categories qualified, mid-qualified and non-qualified. Tiered pricing is normally the worse type of plan.
Blended pricing – Blended prices use one flat rate fee to charge you for processing and markups.
Interchange-Plus pricing – With the interchange-plus pricing markup cost and the interchange rate are separated.
Membership pricing- Membership pricing separates the markup cost and the interchange rate. Also, a flat rate is charged for processing instead of a percentage of the sale.
Depending on the size of your business you may want to choose between blended and interchange-plus. Small businesses may benefit more from the simplicity of the blended pricing, while big businesses may save more with the interchange-plus or membership-based pricing. Taking the time to break down how much you are being charged will allow you to figure out if and where you can make changes to your merchant service plan.