Cost of doing business or charge a fee?
Just yesterday, another post surfaced on one of the listservs I subscribe to about charging a convenience fee for credit card use.
There are two prevailing schools of thought on credit card use and the resulting fees:
- The cost of accepting credit cards is a cost of doing business and the utility absorbs the fees
- The cost of accepting credit cards is a burden that should be borne only by customers who choose to pay by credit card and those customers should pay the fees
Before making a determination if your utility should charge a convenience fee, you must first evaluate why you accept credit cards.
Cost to be absorbed by the customer
Utilities that charge a convenience fee view the fee as a way of recouping the cost of the credit card transaction without spreading this cost across the entire customer base. A common refrain from utilities like this is “it’s not fair for all customers to pay for those customers who want to pay by credit card”.
If your utility chooses to accept credit cards only because a few, vocal customers have requested it and not because you see the value to your organization in doing so, then charging a convenience fee makes sense.
However, this logic fails to take into account the costs associated with other payment methods. Accepting a payment by cash in the office costs considerably more (wages for the clerk to taking the payment and making change, balancing the cash drawer, preparing a daily deposit and taking the deposit to the bank) than processing a bank draft. Would it be fair to charge customers paying in cash extra? I think not.
Cost of doing business
Utilities choosing to accept credit cards and absorb the fee generally feel they are providing a service for the customer and reducing their own workload at the same time.
One response to the listserv post I mentioned above noted a decrease in the number of customers on the cut-off list as a result of accepting credit cards.
What other utilities do
If you’re interested in seeing how other utilities handle credit cards and convenience fees, the 2015 Utility Fee Survey results recaps how many utilities accept credit cards and how many of those charge a convenience fee.
Free rates dashboard webinar today
I’ve previously written about the Utility Rates Dashboards from the Environmental Finance Center at UNC. The EFC has just released the 2016 North Carolina Water and Wastewater Rates Dashboard and will be sponsoring a free webinar today at 3:00 pm EDT introducing the dashboard.
Do you need help evaluating credit cards and convenience fees?
If your utility needs assistance evaluating credit cards and convenience fees, or any other way of reducing walk-in traffic, please give me a call at 919-232-2320 or e-mail me at firstname.lastname@example.org to learn how a business review could help your utility.
© 2016 Gary Sanders