Credit Card Surcharges: What to Know Before Passing On Fees

By Genni Burkhart, Editor

Between declining insurance reimbursements, rising supply costs, and staffing pressures that show no sign of easing, running a profitable dental practice has complexities. Almost every dental practice closely tracks obvious costs. However, credit card processing fees can be ambiguous because they aren't billed on an invoice. They're deducted passively in monthly merchant statements and only recognized when those bills are reviewed line by line, which can add up quickly. For example, a practice collecting $900,000 annually, with 80% of payments made by credit card at a 3.25% rate, pays more than $23,000 a year to card processors.

Given these costs, it makes sense that credit card surcharging is now a common topic in dental practice management. The idea is that instead of covering processing fees as overhead, practices can add a fee for patients at checkout, usually about 3%. But surcharging isn't as simple as tacking on fees. It requires following state laws, card network rules, insurance contracts, and IRS reporting requirements. Done wrong, it creates more problems than it solves. Done right, it can meaningfully improve a practice's financial position.

The difference is in the details.

What Is a Surcharge and Where Is It Legal?

A surcharge is an extra fee added when a patient pays with a credit card. However, you cannot add a surcharge to debit card payments under any circumstances. This is a strict rule set by federal law and by all major card networks, regardless of how the program is set up.

As of 2025, some states limit fees to 2%, while others allow surcharging as long as it's disclosed up front. Because state laws can change, practice owners should check the latest rules in their jurisdiction, consult legal counsel before enacting surcharges, and regularly review regulations.

Why Many Practices Think Twice

Processing fees usually range from 2.5% to 4%. With reimbursements remaining the same and costs rising, it's understandable to seek recovery of these fees. When practices are upfront about surcharges, patients are more likely to accept them. Unexpected fees, on the other hand, often lead to pushback.

However, the savings aren't always what they initially appear to be. Most credit card processors also charge practices a flat monthly fee of $40 or more, in addition to the fees patients pay. And retaining patients should cause a practice to think twice. According to research from the California Dental Association (CDA), 55% to 75% of consumers are less likely to return to a business that adds a surcharge. Since the average dental patient brings in about $4,500 over their lifetime and costs $150 to $300 to acquire, losing patients over a $9 fee doesn't make sense.

Virtual credit cards (VCCs), which dental insurance plans now often use for reimbursements, add another challenge. VCCs have a set balance and will be declined if a surcharge makes the total go over that amount. Yet card network rules say that if you surcharge one credit card, you must surcharge all of them. This means the practice may have to lower the invoice to match the VCC balance, ending up paying the cost it wanted to avoid. Surcharging can also lead to audits by insurance carriers and may affect reimbursement rates.

At the 2025 AADOM Practice Makes Profits seminar, dental office managers were clear that processing fees are a cost of doing business and that a modest fee adjustment is a cleaner path.

The Rules for Doing It Right

For those choosing to implement surcharging, following the card network compliance steps is mandatory. Practices must:

• Provide Advance Notice: Notify the acquiring bank and processor at least 30 days before launch.
• Place Signage: Post surcharge disclosures at every entrance and every point-of-sale terminal.
• Provide Receipt Disclosure: The surcharge must appear as a separate line item on every receipt.
• Recognize Card Brand Caps: Visa limits surcharges to 3%; Mastercard allows up to 4%. Neither may exceed the practice's actual cost of acceptance.
• Follow State-by-State Compliance: Multi-location practices must comply with each state's laws. If you operate in multiple states, remember that what's legal in one state may be prohibited in another.
• Honor Insurance Payer Contracts: Some agreements expressly prohibit passing fees to patients. Violating them can result in reduced reimbursement or termination of the provider agreement.

It's worth noting that vendors selling these programs aren't required to (and often don't) vet state laws or payer contracts before enrolling a practice. As Merchant Advocate has documented, compliance responsibility falls on the practice, not the vendor.

Consequences of Getting It Wrong

It should come as no surprise that failing to follow the rules can have serious consequences. For example, violating card network directives can lead to fines or losing the ability to accept those cards altogether. In New Jersey, improper surcharging is considered an unlawful business practice under consumer protection law. Tax reporting is another area that can be missed. Processors report the total payment amount on 1099-K forms, including the surcharge, so a practice with $750,000 in real revenue might see $772,500 reported. If this isn't reconciled correctly, it can look like underreported income. Dental Economics reported last year that these mismatches are getting more attention from the IRS.

Know Before You Leap

Credit card surcharging is legal in most states and, when handled correctly, is a legitimate way to recover costs. But compliance requirements are demanding, documented patient retention risks are high, and the savings are often less than processing companies claim. The practices that come out ahead are the ones that make the decision deliberately, consult legal counsel and a tax advisor, and have a detailed look at the payer contracts well in advance.

The goal is a financially healthy practice that maintains its patients' trust. The practice owner who arrives with current information and sound professional guidance will always be in a stronger position than one who's acting primarily on a vendor's pitch.

References

1. Cohen, E. (2025, July 31). Navigating credit card surcharging compliance this tax season. Dental Economics.https://www.dentaleconomics.com/practice/article/55307018/navigating-cr…
2. Merchant Advocate. (2025, January 30). Who wins when you pass credit card fees to patients? It's not who you think. American Association of Dental Office Management. https://www.dentalmanagers.com/blog/who-wins-when-you-pass-credit-card-…
3. Merchant Advocate. (2025, September 30). Passing credit card fees at dental practices: An updated guide. American Association of Dental Office Management. https://www.dentalmanagers.com/blog/passing-credit-card-fees-at-dental-…
4. Nieto, P. (2025, May 22). Surcharging patients' credit cards: Good or bad idea? Colorado Dental Association.https://cdaonline.org/news/latest-news/surcharging-patients-credit-card…
5. Best Card / California Dental Association. (2025, November 13). Surcharging patients' credit cards: Decisions for dental practices. California Dental Association. https://www.cda.org/newsroom/endorsed-services/surcharging-patients-cre…
6. Sampson, E. M. (2025, November 6). Can dentists pass credit card fees to patients? Comparing surcharging rules in New York, New Jersey, and Pennsylvania. Post & Schell, P.C. https://www.postschell.com/insights/can-dentists-pass-credit-card-fees-…

Author: With over 16 years as a published journalist, editor, and writer, Genni Burkhart's career has spanned politics, healthcare, law, business finance, technology, and news. She resides in Northern Colorado, where she works as the editor-in-chief of the Incisor at DOCS Education.