Credit cards: the nuts and bolts.

Accepting credit cards in your office--both for capturing charges immediately at the time of service and for billing residual balances--has huge advantages. But how do you arrange for credit card processing at your office at the best possible price?

Several processing services are available. Which one you choose will depend not only on cost, but also on what specific services you need.

It will also depend on what cards you wish to take. MasterCard and Visa require you to establish a merchant account through an intermediary, but American Express and Discover give you the option of applying directly to them.

Your current bank is probably the easiest intermediary to turn to, but many offer credit card services as part of a package that will include other merchant services you may or may not need.

Another option is an independent sales organization (ISO), which is essentially a broker who represents one or more card processors. An ISO will set up and serve your office but, like a bank, will not do the actual processing itself: It outsources that job to a third-party credit card processor.

If your state or city has a small business and trade association, ask if it offers credit card processing at discount prices. This is a particularly good option in many areas.

Consider only processors that provide excellent customer service. Call colleagues and ask which banks or processing companies they use, and ask each candidate company for a list of the medical offices they already serve. Call some of those offices and ask hard questions: How difficult is it to reach customer support? Are problems handled quickly? How does the provider deal with "chargebacks" (charges later disputed by the cardholder)?

Also question the processors closely about their level of support: Are their phones staffed 24 hours a day? Do they charge for support, monthly or per call?

Compare prices carefully. Some providers charge application fees of up to $200, and these may be nonrefundable even if you change your mind. You may also be asked to pay setup or account activation fees, Internet processing fees, customer support fees, etc. As always, be sure you have a complete understanding of all the charges you will incur before making your decision and signing a contract.

The principal equipment cost will be for the terminal, which is the machine used to swipe cards. Basic terminals typically cost between $150 and $300; terminals with printers are $200 to $600; and wireless terminals can run from $600 to $1,000. Leases start at $35 a month and rise from there, depending on the sophistication of the terminal and the length of the lease.

The primary ongoing fee is the "discount rate" or "swipe rate," a percentage the provider takes off the top of each transaction. Some processors charge different rates for in-person transactions, compared with mail, telephone, or Internet transactions. If you plan to sell products via mail order on your Web site, you'll want to ask about that. Ask about reduced rates for high volume, or for total receipts higher than a specified amount per month.

Watch out for extra charges, such as "per transaction" fees and monthly transaction summary preparation fees. Such fees may be negotiable or even waivable, although the company may not volunteer that information.

Beware of long-term leases with early-termination fees. If you are unhappy with your service, you don't want to pay a hefty charge to change companies. Also watch out for a trick borrowed from the consumer credit card industry: low introductory rates that later increase significantly.

Find out how long it takes for receipts to be deposited to your account, as this can vary widely. A lower swipe rate won't be worth it if you don't have the use of your money for months after the transaction.

If your office will be selling merchandise over the Internet, you will need a secure server that can encrypt credit card information, a processing company that provides secure ordering, or (preferably) both.

Finally, if you are not using a bank or financial company you know well, make sure the company is legitimate by contacting the Better Business Bureau. And if the company is based primarily on the Internet, as happens more and more frequently, make sure you get a physical address and phone number, plus recommendations from existing clients.

DR. EASTERN is an author and lecturer on practice management issues. He practices dermatology and dermatologic surgery in Belleville, N.J.

BY JOSEPH S. EASTERN, M.D.