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The Financial Side of Dentistry by Wesley Read, CPA, CFP

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Categories: Financial Planning and Investments; Practice Management, HR and Accounting;
The Financial Side of Dentistry Credit card processing and merchant services for dental practices

by Wesley Read, CPA, CFP

Credit card processing is one of the most misunderstood and oversold expenses in a dental practice. While processing fees are unavoidable, how merchant services are structured can materially impact profitability over time.


Why cost-plus credit card processing is a must
When a patient pays with a credit card, the issuing bank (such as Chase or Capital One) and the card network (Visa, MasterCard, Discover, or American Express) charge interchange fees. These fees typically range from 1.5% to 3.5% and are incurred on every transaction, regardless of which payment processor you use.

Because interchange fees are unavoidable, the best outcome for a dental practice is to pay those fees plus a small, transparent markup. This is known as cost-plus, or interchange-plus, pricing.

Under a cost-plus arrangement, the processor discloses exactly what they charge on top of interchange. For example, some cost-plus processors charge a markup of around 0.20% plus $0.10 per transaction, along with modest monthly service fees. By comparison, traditional processors, often recommended by banks, regularly add 2% or more to interchange fees. Over time, that difference meaningfully reduces practice profitability.


Beware of ‘No credit card fees’ marketing
Some processors claim that you can eliminate credit card processing fees in exchange for a small monthly payment. Be careful. It’s likely a deceptive sales tactic.

Interchange fees must still be paid. If a processor were truly absorbing those fees while collecting only a small flat monthly amount, it would not stay in business. What typically happens is that the processor surcharges your patients and passes the credit card fees onto them.

This creates several risks. Visa and MasterCard require that any surcharge be clearly disclosed and capped at 3%. Some states even prohibit surcharging altogether. These arrangements often frustrate patients, damage trust, and expose the practice to compliance risk without meaningful protection.


PPO virtual credit cards should be declined
Many PPOs attempt to pay dentists using virtual credit cards instead of checks. The practice receives a one-time card number that can be processed immediately, which the PPO markets as faster and more secure.

In reality, these payments carry interchange fees of 4% to 6%, making them the most expensive form of payment a practice can accept. PPOs are often incentivized to push virtual credit cards because they receive rebates from processors.

Practices should opt out of virtual credit card payments and request payment by check or EFT instead. The opt-out process typically begins by calling the phone number listed on the explanation of benefits or payment notice. After already accepting discounted PPO fees, there is no reason to give up an additional 5% simply for convenience.


Do not surcharge patients
Surcharging patients for paying with a credit card creates unnecessary friction and makes the practice appear transactional. Fees should be set with the assumption that patients will pay by credit card. When patients pay with cash or debit, that should be viewed as a bonus.

Debit cards already carry the lowest interchange fees, and under U.S. regulations, processors are not allowed to add a markup on top of debit interchange.

By making these adjustments, you’re protecting your margins and building a stronger financial foundation for the rest of your practice operations.
Author Bio
Wesley Read Wesley Read is the CEO of PracticeCFO and brings extensive expertise as a certified public accountant, certified financial planner, and Series 65 licensed advisor. He earned both his bachelor’s and master’s degrees in accountancy from Brigham Young University.
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