What is Cash Discounting?
We recently launched a Cash Discount Program for our HIPAA compliance customers at PCIHIPAA. We feel it’s the right program for those that are sick and tired of the confusion and rising costs of accepting credit cards in their practice. Hopefully this helps explain things.
Where do all the credit card fees go?
I see most practices paying between 3% and 4%. It’s easy to calculate. Pull out your merchant statement and take the costs you paid (the money you did not receive) and divide it by the total volume of credit card transactions. For every $100, you are probably paying between $3 and $4. The myth is that all fees go directly to Visa, MasterCard, Discover, or American Express. They don’t. Visa receives about 15 cents out of every $100. The majority goes to big banks to pay for your customer’s credit card reward programs. Yes, you are paying for your customer’s airline miles and cash back programs. They’re called “Interchange Fees” and they cost you about 2% ($2 out of every $100). They should call them “Send My Customers to Bora Bora Fees.” So that’s about $2.15 out of the $3 to $4. The rest goes to the company that handles your credit card processing, and said they would save you money.
What is cash discounting?
Cash discounting enables you to add a Service Fee (3% to 4%) to all services rendered. You then communicate a “cash discount” to anyone that decides to pay by cash or check. Customers still have the option to pay by credit card. If customers decide not to pay by cash, a Non-Cash Service fee is automatically calculated and included on the credit card receipt.
Is it legal?
Yes. There is nothing in the credit card processing laws that prohibit merchants from offering a discount to pay by cash or check. Proper signage needs to be posted and communicated at the point-of-sale, and credit card receipts need to identify the Non-Cash Service Fee.
How does it all work?
It’s very simple. We provide you with a new EMV terminal that has the Non-Cash Service Fee pre-programmed. Prior to receiving payment, you ask the patient, “Would you like to receive a discount by paying by cash or check?” If yes, you collect the cash and eliminate the credit card processing fees. If no, you process the transaction just like you do today. The only difference is the patient is now contributing to their Bora Bora trip and not you. You receive the entire $100 for your services, and they pay $4 to cover the credit card processing fees.
Do I need to change my pricing?
No. Your prices reflect the discounted price if patients pay by cash. If they choose not to take advantage of the cash discount program, your prices do not change. The only difference is there’s a Non-Cash Service Fee that is added to your listed price.
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Is it worth it? What if my customer object? I don’t want to lose customers.
For most practices, credit card processing fees are material. For example, if you are paying $1,000 per month, that is $12,000 in annual profit. That pays for your own Bora Bora trip every year. Also, since these fees are 100% profit, if your current profit margins are 35%, the savings is equivalent to increasing your annual billings by $34,386. How much effort does it take to generate $34,386 in billings?
Our experience is that customers will not object to an extra $4 to $10 per invoice. It’s now the cost of doing business and enables you to continue to provide high quality service without increasing your general fees. We all pay ATM fees, and other fees, when we use our credit and debit cards. This trend is now becoming more and more part of everyday business.
In addition, we can also program the terminal so your staff can choose whether to charge the Non-Cash Service Fee or not. This way if a patient happens to object, you have the option to pay for their Bora Bora trip. The program can be designed in a way where your staff can choose. It’s entirely up to you.
We launched the Cash Discount Program, because we are all the victims of confusing, and rising credit card processing fees. Big banks raise their interchange fees every year. Even if we price your fees at Costs +, Interchange +, or Bora Bora +, your credit card processing fees will continue to rise no matter what we do. With cash discounting, you can experience unlimited processing, and your costs will not increase. At PCIHIPAA our mission is to mitigate risks for our clients, while also saving them time and money. The Cash Discount Program aligns with our mission.
Learn more at pcihipaa.com/officesafepay or call (800) 588-0254