Tessa Quinn
The practice of hospitals and medical practices passing on credit card fees to patients is not new, but it has become a hot topic in recent years, with some seeing it as a way to offset the cost of doing business with credit cards, and others considering it an unfair charge for patients. In this context, charging patients a fee for using a credit card is known as surcharging. While it is not a common practice and is illegal in some states, it is permitted in certain states with specific regulations. The legality and implications of passing on credit card fees to patients are important considerations for healthcare providers, and they must carefully weigh the pros and cons of implementing such charges.
| Characteristics | Values |
|---|---|
| Charging patients a fee to use a credit card | Referred to as "surcharging" |
| Surcharging legality | Illegal in some states and for federally qualified health centers |
| Number of states prohibiting surcharging as of 2023 | 2 (Connecticut and Massachusetts) |
| Debit cards | Can never be surcharged, even if "run as credit" |
| HSA and FSA cards | Cannot be surcharged in any state |
| Credit card processing fees | Interchange, assessments, and markup |
| Interchange and assessment fees | Paid to the banks that issue credit cards and the card companies themselves |
| Markup | Profit for the payment processor |
| Payment processor | Facilitates the transfer of money from the patient to the practice |
| Average processing fee | 3-5% |
| Cash discounts | Incentivize patients to pay with cash |
| Pros of charging credit card fees to patients | Accelerates payment collection, improves patient satisfaction |
| Cons of charging credit card fees to patients | Imposes an additional financial burden on patients, may encounter patient resistance |
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What You'll Learn
Pros and cons of passing credit card fees to patients
The practice of passing credit card fees to patients is widely known as surcharging. While it is not a common practice and is illegal in some states, it is worth noting that, as of 2024, only a few states prohibit credit card surcharges. The rules and regulations surrounding surcharging are unclear and ever-changing, varying by state and area.
Pros of passing credit card fees to patients:
- It offsets the cost of doing business with credit cards, which can be high.
- It can accelerate payment collection and reduce wait times for patient payments.
- It may increase collection rates as patients are more likely to pay on time with credit card options.
- It streamlines billing and minimizes manual invoicing and follow-up, saving time and resources.
- It can improve patient satisfaction by providing a more convenient and flexible payment method.
Cons of passing credit card fees to patients:
- It may impose an additional financial burden on patients, especially those already struggling with medical expenses.
- There may be patient resistance or dissatisfaction due to reluctance to share credit card information or a preference for alternative payment methods.
- It can introduce security risks in storing and processing credit card information; medical practices must ensure compliance with data protection regulations, such as the PCI data security standard.
- It requires compliance with specific legal and regulatory standards for credit card processing, including liability for unauthorized charges and breach notifications.
- There is a risk of losing patients as some may not want to pay the extra fee.
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Credit card surcharging laws by state
Credit card surcharging laws vary across different states in the US. While some states allow surcharging, others have unique laws and restrictions in place. As of 2024, only a handful of states prohibit credit card surcharges, where businesses charge an extra fee for credit card usage. However, it is crucial to be aware of the specific regulations in your state before implementing credit card surcharges. Here is a breakdown of credit card surcharging laws in some states:
California
Credit card surcharging is illegal in California as of July 1, 2024. The state passed Senate Bill 478, aiming to eliminate "junk fees" and false advertising, which includes credit card surcharges.
Texas
Surcharging is not permitted in Texas. However, businesses can charge service fees, convenience fees, and offer cash discounts.
Illinois, Colorado, Georgia, and Kansas
These states allow surcharging with certain conditions. In Illinois, the surcharge rate is capped at 1% or the total processing fee, whichever is lower. Colorado has a maximum surcharge limit of 2% of the transaction amount. Georgia permits convenience or swipe fees but mandates that businesses offer alternate payment options. In Kansas, merchants must incorporate credit card fees into the listed price of products.
Florida
While Florida has a state law banning surcharging, it is not enforceable. Federal courts have deemed this ban unconstitutional, allowing businesses to impose surcharges with proper customer notification.
Alaska, Arizona, Arkansas, Nebraska, New Hampshire, New Jersey, Utah, and Vermont
Credit card surcharging is legal in these states, with some requiring clear notifications of the surcharge to consumers.
It is important to note that surcharging laws are subject to change, and businesses should consult the latest regulations in their respective states. Additionally, there are nationwide rules that apply to surcharging, such as capping the surcharge rate at 4% (3% for Visa) and not applying surcharges to debit cards.
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How to set up a credit card surcharge program
Setting up a credit card surcharge program can be a complicated process, but it can also be beneficial for your business. Here are the steps to follow when setting up a credit card surcharge program, particularly for hospitals and medical practices:
Know the Rules and Regulations
Before implementing a credit card surcharge program, it's crucial to understand the legal and regulatory landscape. As of 2024, only a few states prohibit credit card surcharges, but each state may have its own restrictions and guidelines. Make sure to review your specific state's laws and federal laws to ensure compliance. Additionally, notify major credit card institutions in writing about your intent to surcharge, and clearly inform your clients about any surcharges through invoices or signage.
Choose a Payment Processing Provider
If you work with a payment processing provider, they can handle much of the heavy lifting. Not all merchant account providers offer surcharging capabilities, so it's essential to choose one that suits your needs. A good provider will help you navigate the complexities of setting up a surcharge program, ensuring compliance and minimizing the workload on your end.
Register with Card Brands
You must register with major card brands such as Mastercard, Visa, and Discover, notifying them in writing that you intend to impose a surcharge on customers using their cards. American Express does not require this registration.
Reprogram or Acquire Point of Sale Terminals
Your point of sale terminals will need to be reprogrammed to add the surcharge fee automatically. Alternatively, you may need to purchase new terminals with this functionality. Ensure that your terminals can differentiate between credit and debit cards to avoid incurring fees on debit transactions.
Implement Best Practices
To maintain strong customer relationships, consider the potential drawbacks of surcharging, such as customer satisfaction and loyalty. Be transparent about the surcharge by listing it as a separate line item on invoices, clearly labeled with the dollar amount. Ensure compliance with data protection regulations, such as the PCI Data Security Standard, to safeguard credit card information.
Notify and Inform Clients
Ensure that your clients are aware of the surcharge by clearly stating it on invoices, signage, or other forms of communication. This transparency will help manage expectations and avoid potential dissatisfaction.
Evaluate the Impact
After implementing the surcharge program, monitor its impact on your business. Consider the effect on payment collection times, collection rates, billing processes, and patient satisfaction. Regular evaluation will help you identify any areas of concern and make necessary adjustments.
By following these steps, hospitals and medical practices can establish a credit card surcharge program that complies with regulations, streamlines payment processes, and potentially improves cash flow.
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Alternatives to credit card payments
Credit card fees can be expensive, and it is worth noting that as of 2024, only a few states prohibit credit card surcharges. However, it is important to be aware of your state's regulations before implementing any credit card surcharges. Here are some alternatives to credit card payments:
Medical Credit Cards
Medical credit cards can help you spread a big medical bill across multiple payments. These cards are offered at various healthcare providers, including doctors, optometrists, and dentists. However, they often come with high interest rates and deferred interest, which can make them a costly option. Before choosing this option, it is important to understand the promotional interest rate, the ongoing interest rate, and the minimum payment requirements.
Payment Plans
Many medical providers, including physicians, dentists, and hospitals, offer no- or low-interest payment plans for medical bills. This option allows you to break down your bill into multiple equal payments over a few months. When considering a payment plan, be sure to ask about any associated billing charges or fees.
Conventional Credit Cards
Using a conventional credit card, especially one with a long 0% interest introductory period, can be a good alternative. However, it is important to have a plan to pay down the debt before the introductory period ends and to be aware of any ""deferred interest" catches.
Personal Loans
Personal loans from your bank or credit union can be an option for covering medical expenses. These loans may offer more favourable terms and lower interest rates than credit cards.
Charity Care or Financial Assistance Programs
Many hospitals offer charity care or financial assistance programs to help patients who are struggling with medical expenses. It is worth inquiring about these programs to see if you are eligible for financial support.
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How to avoid credit card fees as a patient
Credit card fees can be a significant expense, and it is important to know your rights and options when it comes to paying medical bills.
Firstly, it is essential to understand that, in most cases, you cannot be forced to pay medical fees with a credit card. The Centers for Medicare and Medicaid Services (CMS) has stated that health plans cannot require physician practices or healthcare organizations to accept virtual credit card payments, which often have high service fees. You have the right to request an electronic funds transfer (EFT) instead, which your health plan must comply with.
If you do choose to pay with a credit card, be aware of the potential for additional fees. Some medical practices may pass on credit card processing fees to patients, although only a few states currently allow this. These fees should be clearly listed on invoices, and you should be informed about any surcharges. To avoid these fees, you could opt to pay with cash or check, as some practices offer a discount for these payment methods.
To minimize financial strain when paying medical bills, consider the following:
- Review your medical bills for any inaccuracies, overcharges, or double-billing. Contact your healthcare provider to clear up any errors and ensure you are not overpaying.
- Negotiate prices with your healthcare provider. If you are paying with a credit card, you may have some negotiating power to lower your bill.
- Understand the payment options offered by your healthcare provider. Some providers offer interest-free payment plans for low-income individuals, which can be a more affordable alternative to credit cards.
- If using a credit card, be mindful of interest rates and promotional periods. Some credit cards offer low-interest or no-interest periods, so paying during this time can reduce interest rates. However, if the balance is not fully paid by the end of the promotional period, interest will accrue on the full amount charged.
- Compare different credit cards and their fees. Negotiate lower rates with credit card companies, and consider using money transfers or debit cards to avoid processing fees.
By being informed about your payment options and the potential fees involved, you can make the best decision for your financial situation and avoid unnecessary credit card fees as a patient.
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Frequently asked questions
Hospitals and medical practices may charge a fee for credit card usage, often referred to as "surcharging". While it is not a common practice and is illegal in some states, it is permitted in certain states with specific regulations.
Credit card processing fees are a significant expense for hospitals and medical practices, and surcharging can help offset these costs. Processing fees can range from 3% to 5% or even higher, cutting into the profits of these institutions.
Hospitals and medical practices are required to notify patients about any surcharges before charging. This can be done through letters, invoices, or signage. It is always good to be aware of the regulations in your state regarding surcharging.
Yes, some hospitals may offer cash discounts, where patients who pay in cash receive a discount. Additionally, hospitals may accept other forms of payment, such as checks or electronic funds transfers (EFTs).
Surcharging can impose an additional financial burden on patients, especially those already struggling with medical expenses. It may also introduce security risks, as medical practices must securely store and process credit card information, complying with data protection regulations. Furthermore, patients may prefer alternative payment methods, and the practice of surcharging could lead to dissatisfaction or a loss of patients.
