Why is there so much confusion about credit card processing costs?

Dr. Joe Blaes interviews Leo Townsend

Why is there so much confusion about credit card processing costs?

The reason is that salesmen have to sell. They will tell you a story to get the sale, whether it's true or not. If they explain interchange and price it with a reasonable mark up, this would not be enough profit for them. It is more profitable for salesmen to play a shell game with interchange.

What are some of the most outrageous things you've heard salesmen say?

There are companies advertising themselves as offering healthcare or medical industry pricing. They claim that if you're not on this program you're on retail and therefore paying too much. There is no Visa/MasterCard/Discover medical/healthcare industry program. This is a marketing pitch to make merchants think that their existing processor has them on the wrong program and therefore charging them too much. This is an example of what I call gimmick pricing.

Why has the government not stepped in to regulate credit card processing rates?

The government made an attempt at regulation with the Durbin Amendment which was implemented in October 2011. The Durbin Amendment took away 90% of the profit that the "big" banks (those with more than $10 billion in assets) would make on debit/check cards. Unfortunately there was nothing in the amendment that required processors to pass along this savings to the merchant. The vast majority received no benefit from the Durbin Amendment. This is why companies will try to sign merchants under gimmick pricing or a single rate program, because there is so much profit for them on the regulated debit/check cards.

How do most dental associations stack up with regard to special pricing for their members?

Over the years I've talked to over 30 dental associations. I have found that they are locked in to a contract with their "preferred" provider. This provider produces thousands of dollars a year in income for the dental associations. Most of these contracts were negotiated based on the association's profitability not the pricing given to their members. They don't know any more than the merchants do. It's all based on profitability.

Will my current terminal be able to process the new "smart cards"?

Visa/MasterCard announced in October 2012 that merchants must have Smart Card capable terminals by October 2015. Smart Cards have a computer chip inside that helps reduce fraud. Your existing credit cards will be upgraded within the next few years. Per current card association regulations, if you do not have a Smart Card capable terminal after October 2015 and take a fraudulent or stolen credit card, you assume 100% of the liability. Unfortunately, immediately after this announcement, salesmen were calling current and prospective clients and telling them they had to change their machine immediately. Most of my competition is giving away their inventory of non-Smart Card capable terminals to attract new business. This means you'll have to pay their price when it comes time to upgrade.

I've heard about termination fees. Can you explain them?

I've found that 95% of processing companies charge some sort of termination/cancellation fee. Most salesmen never mention it when trying to get your account. They can be lower than $100 but most average around $500. I recently had a dentist with a $35,000 lost profit termination fee. I explained that in his case they couldn't charge him a termination fee if he didn't cancel the account. He switched his account and saved $1100 per month and his former processor is charging him $35 a month for an open but dormant account.

Please contact Leo Townsend, president of International Payment Solutions at 888-474-8431. You can fax a current statement to 331-248-0760 for a free, no obligation analysis of your cost.

Leo Townsend is the owner of International Payment Solutions. He is widely recommended by some of the biggest dental consultants in the country and has saved dentists thousands of dollars on their credit card processing since 2001. His focus is to educate merchants about how to save money on their credit card processing.