The Danger of Virtual Credit Cards

Some insurance companies make payments to practices by creating a virtual credit card with a credit balance and then providing the card number. The practice can then enter the credit card number into their merchant terminal and receive payment.

Many dentists have reported that this arrangement was put in place without their consent and that opting out was not presented to them as an option.[1] Insurance companies favor this arrangement because it is more efficient for them than issuing checks or arranging ACH payments.

There are several disadvantages to allowing an insurance company to pay you in this way. First, when you process the payment through your merchant terminal, it is treated like any other credit card payment, and a processing fee of a couple of percentage points gets applied. This cost can be particularly galling in a PPO arrangement where you are already receiving reduced fees. While most dentists will swallow merchant account fees to provide added convenience to patients making payments, I’m not sure that paying these fees for a huge insurance company’s convenience has the same appeal.

Second, many front desk staff struggle with how to enter this type of payment correctly into practice management software. Is it a credit card payment or an insurance payment? Unless a practice has a clear policy (and perhaps a separate payment code for these payments), it is entirely possible that different staff members in the same practice will take different approaches to recording these payments, causing a distortion in financial reporting.

And finally, there are many possibilities for a larcenous staff member to abuse this payment system.  Use of these cards is not limited to a specific merchant terminal, so it doesn’t take much imagination to conjure up abuse.

Even though individual insurance companies may not present this as an option, most states have passed laws preventing insurance companies from forcing you to accept payment via stored-value credit cards. If you are currently receiving payment in this manner, contact the insurance companies involved and opt out.

[1] See a discussion of one dentist’s experience at Dentists can opt out of credit card reimbursement from third-party payers, ADA News, October 2018,