Is Surcharging Right for My Practice? A Complete Guide for U.S. Practices

As a veterinary practice owner, you're constantly looking for ways to manage rising costs while maintaining quality care for your patients. One option that's gaining attention is surcharging—but is it the right choice for your practice? Let's explore what surcharging means, how it works, and whether it makes sense for your veterinary business.

What Is Surcharging, and How Does it Work?

Surcharging is the practice of adding a fee to credit card transactions to recover payment processing costs. Essentially, you pass the cost of credit card processing directly to clients who choose to pay with credit cards, if permitted and properly implemented. The surcharge applies to the entire transaction amount, not just specific services or items.

Important limitations:

• You cannot surcharge debit cards, prepaid gift cards, or CareCredit transactions
• The same percentage must be applied to all credit card transactions
• You cannot apply different rates to different services
• You cannot surcharge more than your actual cost of credit card processing
• Laws, regulations, and credit card companies may prohibit surcharging or impose additional limits on the maximum surcharge

The Potential Benefits

• Cost Recovery: Surcharging can help reduce your payment processing expenses. For practices with high credit card usage, this can translate to meaningful savings over time.
• Transparent Fee Structure: Rather than building processing costs into your service prices (which affects all clients), surcharging only impacts those who choose to pay with credit cards.
• Automatic Handling: Modern payment systems automatically calculate surcharge amounts for transactions and refunds, reducing administrative burden.

The Potential Drawbacks

Before implementing surcharging, consider these significant challenges:

• Client Experience Impact: Surcharging effectively increases prices for pet owners who use credit cards. This can create sticker shock at checkout and may damage client relationships or even result in lost business.
• Regulatory Complexity: As described below in more detail, the legality of surcharging varies significantly by state, and regulations are constantly evolving. 
• Tax Implications: In many states, if your services are taxable, the surcharge may also be subject to sales tax, adding complexity to your accounting.

Legal and Compliance Considerations

Surcharging legality varies significantly by state, and regulations are constantly evolving. Some states prohibit surcharging entirely, while others may impose additional obligations on businesses that surcharge, like notification requirements. Failure to comply can result in fines for your practice. 
For states that require notification, you'll need proper signage at entrances and checkout areas, and your online payment systems must clearly display surcharge information.

Additionally, credit card companies impose merchant surcharge rules you’ll need to follow. Key compliance requirements:
•    Proper signage at your entrance and checkout area
•    Clear disclosure on online payment pages
•    Consistent application across all credit card transactions
•    Comply with all state regulations and card network rules

You'll need to research your state requirements and may want to consult with a legal expert to ensure compliance.

Device and Technical Requirements

Most existing payment devices can handle surcharging, though some older models (like the Ingenico iSMP4) may not be compatible. 

The TLDR

Surcharging can be an effective tool for managing payment processing costs, but it's not a universal solution. The decision depends on your practice's specific circumstances, client base, and priorities. While it can provide cost savings, it may impact client relationships and requires careful implementation to avoid compliance issues.

Before deciding, consider consulting with your payment processor and legal, tax, and accounting advisors to fully understand the implications for your specific situation. Remember, the goal is to create a sustainable business model that serves both your financial needs and your clients' expectations.

Whatever you decide, ensure that your choice aligns with your practice's values and long-term client relationship goals. After all, the health of your business depends not just on managing costs, but on maintaining the trust and loyalty of the pet owners who rely on your expertise.