You Have to Give Them Credit

My graduate program in Clinical Psychology did a pretty good job of teaching me how to conduct ethical, effective psychotherapy. It didn’t teach me squat about how to run a private practice.

Among the dozens of things missing from my education was how to arrange to accept credit card payments from my clients — a necessity if you are working with clients under the age of 120. (If they are over the age of 120, you may need to learn how to accept goats and chickens for payment in lieu of MasterCard.)

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So how do you obtain one of those swiper-thingies that let your clients hover their cards or iPhones nearby, magically transferring cash to you for your excellent work? Instead of Googling “Swiper Thingie” you might enter “Credit Card Merchant Service” the actual name for a company that will grant you the authority to put a Visa decal on your front office window. Go ahead — Google that. I’ll wait here.

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Whoa! You just received more high-pressure sales pitches than if you had walked into a car dealership holding a winning lotto ticket! Each of them says that their rates are the best, and offer complicated charts to try to prove it. How can this be? And how can you decide which service to choose?

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The sad truth

There is a LOT of money to be made by credit card companies off of your transactions... and that money will be coming out of your pocket. Sad to say, but this industry may hold the record for the number of ways they obfuscate their actual fees.

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You may see their proud proclamations that they charge “...just 0.9% over base…” and come to the highly inaccurate conclusion that, if you run a card for a $10.00 insurance copay, you will be giving them 9 cents.

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But you will have neglected to figure in the monthly fees for this service, the annual PCI compliance fees, the per-transaction fees, the statement fees, the base-rate fee, and the premium card fees. (Ever wondered where that “cash back” money comes from? It will come from your pocket!)

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A good time to give up

Surely if you just read the fine print carefully you can determine the actual rate for each company, right? IMHO, nope. Just give up. They are really, really good at being incomprehensible, and you are an amateur. No matter which merchant service you go with, your “effective rate” will be nowhere near their advertised rates.

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The effective rate is easy to calculate... after you start getting their monthly statements.

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What is the total of your charges for the month, and how much actually ended up in your bank account? You will find (as I did) that the effective rate for a small business will hover around 6%. It is just a cost of doing business: you are paying for your client’s convenience, and for the perk that (unlike checks) cards rarely “bounce” unexpectedly.

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You can also keep a card on file for a client, and charge that card for no-show fees (assuming that you have had the client sign an office policy giving permission for this).

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More to know

• Before selecting a company on your own, see if your practice management software supports it. TherapyAppointment, for example, currently supports two merchant services: if you don’t choose one of them, your transactions won’t be automatically entered into the patient accounting system.
• The rates for cards are not created equal. Amex has the highest rates, “cash back” or “travel miles” cards are next, cards without such perks are next, and debit cards have the lowest fees.
• Don’t store client credit card numbers on your computer, or in a memo field in your online systems. The contract that you sign with your merchant service prohibits this dangerous practice, and you can get big fines if you don’t adhere to that “PCI compliance” policy.
• It is OK, though, to store credit card numbers WITHIN the merchant service or TherapyAppointment using their approved methods. We are very, very good at keeping this information safe if you just put the number where we ask for it. It is a real convenience to have a “card on file” for your client, who may want to rush out after a tearful session rather than stopping to run a transaction: “Charge it to the card on file?” “Sure.” Done.
• A part of your merchant services agreement will state that you will regularly scan for viruses and Trojan Horses and skimmers and keystroke loggers. They don’t seem to care that you don’t know what those are; they still want an annual attestation from you that you have ensured that appropriate security measures are in place. If you don’t complete the attestation annually, they will slap an additional huge fee on your account. If you DO complete it, they will still slap a fee on….but it will be smaller.
• Most merchant services will give you the “swiper thingie” (aka “credit card reader” or “Point Of Sale terminal”) for free if you stay with them for a year. You don’t need to buy one. In fact, one that you buy off Amazon is very unlikely to work with their system.
• Look into Square. If you are willing to forego a lot of convenience and are only interested in paying the lowest possible rates, Square is an unusual company that actually seems to be more transparent about their fees. If you are just starting up and running only a few transactions per week, it may be a good choice for you. They only have transaction fees, not monthly or annual fees. But their services may not be integrated into your practice management system, and you are not likely to be able to store card information within Square.
• Recent policy changes make it permissible for you to charge an additional “card processing fee” for card transactions, or to give a small discount for cash. This is one way to recoup the money that will be scraped from your fees.

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Discouraging? Sorry. I’ve just characterized merchant services as akin to the Mafia or the IRS... and it is good to remember that both these organizations charge higher rates for their services!

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Remember that ALL businesses accept cards today, implying that it is not a completely terrible idea. Apparently, the convenience is worth it!