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Can my medical practice charge a credit card surcharge?

Elaine Pofeldt

Dear Your Business Credit,
Is it legal to charge clients extra when they use a credit card for health care services/copayments? -- Gladis

Dear Gladis,
Yes, like other merchants, health care providers can add an extra charge, but only in certain circumstances.

Here's some background: A court settlement that took effect in January lets retailers in many states add checkout fees to payments by Visa and MasterCard. The settlement is in effect, though it is disputed by merchants who say they did not ask for surcharges but for controls on the swipe fees they pay the card networks. Under the current rules, retailers are allowed to charge fees equivalent only to what they pay to accept the card, up to 4 percent. You have to disclose that you're adding the fee at the entrance to your premises, online, at the point where the patient makes the transaction and on the receipt, according to the nonprofit Consumer Action.

"The changes on surcharging that Visa and MasterCard agreed to apply to all businesses that accept credit cards, including doctors and other healthcare providers," J. Craig Shearman, vice president of government affairs and public relations for the National Retail Federation in Washington, D.C., said in an email. This is not a matter of law, he notes. It is an issue in contracts between Visa/MasterCard and retailers, stemming from the current pending settlement of the lawsuit over those contracts.

"Keep in mind that the settlement is not at all settled," Shearman added. The judge in the case held a hearing in September 2013. "We are still waiting to hear whether he will give the settlement final approval. Whichever way he rules, the losing side is expected to appeal, so this case is going to remain in court for some time yet."

It's important to note that you can't add the fees in states whose laws ban them, including California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas.

Merchants who accept American Express have something else to think about, according to the federation. To add the surcharge to Visa and MasterCard transactions, merchants must also add it to those on American Express transactions. But American Express rules prevent the addition of a surcharge to any transaction. So merchants who want to add the surcharge cannot do so if they accept American Express cards.

There's another issue to consider. Let's say, hypothetically, you fit the criteria to add the surcharge. You still have to ask yourself whether the financial benefits of charging it will outweigh the disadvantages.

Many consumers are feeling squeezed by health care costs these days. A whopping 41 percent of adults aged 19 to 64 reported having trouble paying their medical bills or said they were paying bills over time, according to research released in 2013 by the Commonwealth Fund, an organization that promotes access to health care. Among those chipping away at medical debt, 29 percent had more than $4,000 to pay, while 16 percent owed $8,000 or more. And about one in five had been contacted by collection agencies about their bills.

Adding an additional fee may discourage patients from paying by credit card. If you then have to bill them or accept payments by check, it is possible you may experience collection problems or bounced checks. Because of such problems, one doctor I see has stopped accepting checks and switched entirely to cash and credit cards. Encouraging customers who complain about an added surcharge on their credit card transactions to pay by debit card might be a way to avoid such problems -- if they can afford to do so.

Also bear in mind that adding surcharges may complicate your billing procedures. Leslie Tayne, an attorney in Melville, N.Y., who works with businesses on issues related to credit and debt collection, noted that this might be a discouraging factor for medical practices. "They still have to send the explanation of charges to the insurance company and, sometimes, the medical credit card company as well," she says.

Getting a better understanding of how your merchant account works may help you reduce what you are paying in transaction fees when customers use credit cards. As the American Medical Association points out, fees are lower if the consumer has a card present at the time of the transaction and you can swipe it, than if you have to manually key in a card number. Knowing what causes fees to rise will help you change your payment procedures to keep them to a minimum.

See related: Can my business require a minimum purchase for credit cards?, Should we charge our customers to use credit cards?, Credit card surcharges now allowed