According to the U.S. Federal Reserve, credit card use has been on the rise for several years, and credit and debit cards have surpassed cash and checks as preferred forms of payment. If you do not yet accept credit card payments in your practice, the small percentage that you are "saving" in credit card fees may not be worth it, as pointed out here.


But accepting credit cards is not without risk. Recent statistics show a sharp increase in consumer credit card debt. That means some of your clients may be close to exceeding their credit limit, and when it comes time to processing their card at the end of an office visit, their payment may be denied.

Your informed consent agreement should state a policy or procedure for continuing your services in the event of credit card denial, bounced check or other non-payment situation. For example, some clinicians will not schedule the next appointment until the bill is paid, with the exception of a crisis or emergency situation. Others may stipulate the maximum balance that they will carry on a given client's account.

A more troublesome risk is that even after a person's credit card payment goes through, he or she may later dispute the charge, and request a chargeback (refund) from the credit card issuer.

The chargeback process was included in the Fair Credit Billing Act of 1974 to protect consumers from fraudulent and unauthorized charges. People are supposed to first try to resolve any disputes with the merchant, but many go directly to filing a claim. The credit card issuer conducts an investigation, and if the claim is arbitrated as valid, the disputed amount is withdrawn from the seller's bank and refunded to the consumer.

Here's how chargebacks could play out for mental health professionals:

Third-party credit card

Mary was a litigant in a custody evaluation. She paid her retainer with a credit card in her name. After her retainer was exhausted, additional charges accrued, and when it came time to paying the final balance of $1500, her credit card was swiped, but payment was denied because the charge exceeded her credit limit.

"Here, try this one," said Mary. "It's my mom's card. She lets me use it for emergencies." This time the payment went through, and Mary signed her name. Now that her balance was paid, the psychologist issued the custody report.

A few weeks later, the psychologist received a notification that the credit card holder (Mary's mother) had disputed the $1500 charge, claiming that she had no knowledge of where it came from. The psychologist challenged the dispute, but during the investigation process he acknowledged that he did not have signed authorization from the card holder to approve the charge. Thus, the dispute was settled in the card holder's favor, and $1500 was withdrawn by the credit card company from the psychologist's bank account and refunded to Mary's mother.

Of course, Mary still owed the psychologist $1500, but now that the report was sent out (with recommendations not favorable to Mary) she would have little incentive and possibly limited resources to satisfy her debt.

Dissatisfied client

Jim and Cathy went to see a therapist to work on their relationship. They saw the therapist for 6 sessions, each time paying with their joint credit card. During the last session Cathy announced that she was going to leave her husband, and that she had already retained a divorce attorney. She stated that she would no longer participate in marriage counseling, and no further sessions were scheduled.

A few weeks later, the therapist received a chargeback notice. Cathy's husband, Jim, had disputed the fees for the entire course of counseling ($1200), claiming that the service was not delivered as promised, according to him. The therapist chose to forfeit the money rather than challenge the dispute, lest the disgruntled husband retaliate by filing a complaint with the licensing board.

The therapist then reviewed her informed consent agreement, and added a statement that her fees are for her professional time, not for any specific results.

Unintended consequences of protecting patients' privacy

Dr. Kendall runs a group practice under the business name, "Spring Meadows Mental Health Associates." Being mindful of protecting patients' privacy when she signed up to accept credit cards, she did not want her business name displayed on people's credit card statements. Instead, she arranged to identify her business only by the initials SMMHA on credit card transactions.

Over the next several months, Dr. Kendall received more than a dozen chargeback notices. Apparently, some patients who reviewed their credit card statements had no idea what SMMHA was, and assumed that it was an erroneous or fraudulent charge. Eventually these chargebacks were resolved, but it took several months and several hours of administrative time.

How to prevent (or at least minimize) chargeback situations

The most certain way to prevent chargebacks is not to accept credit cards at all. However, as previously noted, that's probably not the best option. A better option is to set up procedures that minimize the likelihood of chargebacks, and maximize the likelihood that you would prevail if chargebacks are requested:

  • When processing credit cards, make sure that the name on the card matches the person who is receiving service, or is the legal guardian of the client.
  • For third-party payments (other than insurance) such as Mary's mother in the example above, get the client's written permission to contact the third party and have them sign a credit card authorization form. Square provides a sample template, which you can modify for your practice.
  • Update your informed consent document to stipulate terms for credit card payments and payment denials. Include a statement that invites the client to speak with you directly about any disputed charges.
  • Having the client sign a credit card authorization to hold on file makes it convenient to process charges when their card is not available for swipe, such as when they don't have it with them, or when the treatment is for their minor child who comes in alone.
  • Some clinicians also use the card number on file to process payments for late cancellations or no-shows. This may trigger chargebacks, since people tend to resent paying for something they didn't use. However, if you have reviewed the terms with your client as you go over the informed consent at the beginning of treatment, and if you address the issue in a clinically sensitive way after a late cancellation or no-show, it is less likely that the client will pursue a chargeback.
  • If clients' credit card transactions and statements show something other than your name or your practice name (as in the example of Dr. Kendall above), remind them each time they make a payment as to what will show up on their statements. Also include this in your informed consent document, on your website, and on a sign in your waiting room.
  • Some situations, such as the example of Jim and Cathy above, arise unexpectedly. You can't prevent all chargebacks, but with careful attention to your ethics code and to risk management procedures, you will minimize the number of credit card chargebacks.

Disclaimer: The above recommendations may not apply to all situations. While payments via debit cards, gift cards and health savings account cards are processed in a similar way to credit cards, they have different regulations for disputed charges.