A common reason many utilities offer for why they charge a convenience fee for accepting credit card payments is, “It’s not fair for all of our customers to pay for a few who want to use a credit card”.
But is that really the case? Certainly, cash and check payments don’t incur a fee from a merchant processor, but are they really “free” as these utilities seem to think?
Let’s take a look…
Cash payments require entering the payment, printing a receipt, and making change at the time of the payment.
Then, at the end of the business day, someone has to count and balance the cash drawer, and prepare a deposit. Someone then has to take this deposit to the bank. If, for some reason, the cash drawer doesn’t balance, the discrepancy must be researched, and that takes even more time.
Check payments, if they are received in the mail, require opening the mail and entering the payment, unless you’re using a lockbox and there’s definitely a cost for that. Check payments at the counter or drive-up window must be entered and a receipt printed. Checks must also be balanced and a deposit made, whether that means scanning them for remote deposit capture or running an adding machine tape or listing them on the deposit slip, all of which take time.
None of this takes into account if the check bounces! If a check is returned for insufficient funds, you might have to research which account was paid by the check. Then you have to contact the customer and add the bad check amount and (hopefully) a returned check fee back to the account.
Credit card payments
Credit card payments, on the other hand, especially online and IVR payments, require minimal personal intervention compared to processing a cash or check payment.
If you have a fully integrated online bill pay or IVR system, the payments are immediately logged in your system and there is no need to import a file the next day. Even if your online bill pay system isn’t fully integrated, importing a file of credit card payments takes far less time than entering cash or check payments.
Balancing the day’s credit card payments is as simple as comparing the total in your system to the merchant processor’s website or the total from your third-party online bill pay provider.
And, of course, no bank deposit is required for credit card payments.
Some utilities don’t accept payments in person
I know of at least three utilities who, for various reasons, don’t accept cash or check payments in person. And I know of one other that accepts checks and credit cards in person, but no cash.
Admittedly, the three who accept no payments in person are all privately owned utilities. I completely understand the ramifications of a public utility not accepting payments in person.
However, this does underscore the fact that some utilities have acknowledged how costly accepting payments in person can be, and, consequently, they’ve opted not to.
How much does it really cost to process payments?
Obviously, there are costs associated with accepting cash and check payments, especially in person. But how much are these costs and can they be quantified?
This is where you can help!
I’m looking for a few utilities who are willing to invest the time and effort into logging the amount of time the aforementioned activities entail.
If you decide to participate, you will be provided a link to a Google spreadsheet where you can log the number of payments received each day and the amount of time required for each activity.
In exchange for maintaining this log for a month, I will provide you with a detailed analysis of how your utility compares to the other participating utilities. I will publish the results (without identifying the participating utilities) in a future Utility Information Pipeline.
If you’re willing to participate, please email me and I’ll give you a call to discuss the process in more detail.
Have you completed the 2019 Utility Fee Survey?
If you haven’t yet completed the 2019 Utility Fee Survey, please click here to complete the survey. It should take less than five minutes to complete.
If you have any questions, please feel free to e-mail me at firstname.lastname@example.org or call me at 919-232-2320.
Please feel free to share this survey with your peers at other utilities.
Thank you in advance for taking the time to complete the survey and for sharing it with other utilities.
Unsure what payment methods you should offer?
If you’re wondering if your utility is offering the best possible payment options, please give me a call at 919-232-2320, or email me at email@example.com for more information about how a business review could help you find out.
© 2019 Gary Sanders
When it comes to accepting credit card payments, there are two options regarding the fees associated with processing credit card payments. One is to absorb the fees as a cost of doing business and the other is to charge a convenience fee for credit card payments.
In the first case, your utility simply absorbs the cost and your customer only pays the full amount of the bill. In the second case, your customer pays a convenience fee, over and above the amount of the bill, and your utility pays the credit card fees from the convenience fee collected.
Some credit cards, such as reward cards and business cards, incur larger fees than others. Many utilities don’t want to incur the cost of credit card fees and they feel uncertain about charging a convenience fee, not knowing if the convenience fee will cover all the costs associated with accepting credit cards.
Third party convenience fees
A third option is third party convenience fees. If a third party provides your online bill pay or IVR service, such as Logics does with Logics WebPay and Logics PhonePay, the third party processor can charge the fee and your utility still receives the entire about amount of your customer’s bill. In this case, it is up to the third party to pay the associated fees from the amount they charge.
Additionally, convenience fees are not allowed by law in some states. If your utility is located in one of these states and you want to avoid the costs associated with taking credit card payments, third party convenience fees are the solution for you.
In office payments
Obviously, third party convenience fees can’t work for in-office payments because no third party is involved.
But, is there a way to charge a convenience fee for in-office payments?
One solution employed by some utilities is to install a payment kiosk in the lobby and direct customers who wish to pay by credit card to the kiosk. This need not be an expensive kiosk – it can be as simple as a retired desktop computer or a tablet device mounted in a frame so it can’t be stolen. The kiosk is configured to access only your online bill pay site and customers use this to pay by credit card in your office.
A side benefit of your customers using a kiosk in your office is they become familiar with your online bill pay site and may make future credit card payments from home.
Are you considering taking credit cards?
If your utility is considering accepting credit cards and you need assistance determining how best to go about it, please give me a call at 919-232-2320, or email me at firstname.lastname@example.org for more information about how a business review could help.
© 2017 Gary Sanders
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.
Many utilities view accepting credit cards as a way to grow without adding staff and reducing walk-in traffic (especially if they offer online bill pay or IVR phone payments).
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. If you’re interested, click here to register for the webinar.
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 email@example.com to learn how a business review could help your utility.
Staffing survey deadline
The deadline for the Utility Staffing Survey is Friday, April 15. This survey is designed to determine what is adequate staffing for a utility office. If you haven’t already participated in the survey, please click here to complete the Utility Staffing Survey. This should take less than five minutes to complete. I will publish the results in a future Utility Information Pipeline.
Thank you in advance for taking the time to complete the survey. Please feel free to share the survey with your peers at other utilities.
© 2016 Gary Sanders
This is the last of three consecutive Utility Information Pipelines reporting the results of the 2015 Utility Fee Survey, an update to the original Utility Fee Survey I conducted in 2012. 106 utilities, representing 19 states, ranging in size from 83 to 90,000 active accounts participated in the survey.
The first issue summarized the demographics of the survey respondents as well as water and sewer tap and impact fees. The last issue dealt with delinquent fees and policies. Today’s issue explores the remaining fees.
If you’re interested, here are the results from the 2012 Utility Fee Survey:
2012 Utility Fee Survey Results – Part I
2012 Utility Fee Survey Results – Part II
2012 Utility Fee Survey Results – Part III
Clicking on any of the graphs will open a larger image in a new window.
Returned check fees
Of the 106 participating utilities, 105 charge a returned check fee. Returned check fees range from $6.00 to $50.00, as this graph illustrates:
In Utility Information Pipeline #10, I wrote about application for service best practices. One of my recommendations was to charge a non-refundable application fee, in addition to any security deposit, to all new accounts. I’m pleased to report that 55 of the 106 utilities (representing 51.9%) responding to the survey charge such an application or administrative fee. This is down slightly from the 52.3% reported in the 2012 Utility Fee Survey. These application fees range from $5.00 to $100.00 as shown below:
Meter reread fees
25 of the 106 utilities (or 23.6%) charge a meter reread fee if the customer requests their meter be reread. This is up from the 18.2% charging a meter reread fee in 2012. In many cases, this fee is waived if it turns out the customer was correct and the utility misread the meter. Of the utilities that charge a meter reread fee, the fee ranges from $5.00 to $50.00 as this graph shows:
Meter tampering fees
78 of the 106 utilities (or 73.6%) charge a meter tampering fee. This is up from 60.2% charging a meter tampering fee in 2012. Nine utilities charge the actual cost of repairs or cost plus an administrative fee. Four more utilities recover their costs through the judicial system. The remaining 65 utilities charge a flat fee ranging from $15.00 to $1000.00 as shown below:
One of my earliest issues explained why I believe utilities should accept credit cards. Of the 106 utilities responding to the survey, 86 of them (or 81.1%) accept credit cards. I’m pleased to report that this is an increase from 62.5% three years ago. Of the 86 that do accept credit cards, 40 of these charge a convenience fee on at least one form of credit card payments as shown below:
The convenience fees charged by these utilities are too diverse in how they are assessed to be graphed, so they are presented here in a table.
In addition to the fees that have been described in the three results issues, the survey asked what other fees utilities charge. Below I’ve listed a few of the more creative fees that were reported:
Meter test fee
A number of utilities charge a fee if the customer requests that their meter be tested. The survey didn’t specifically ask about meter test fees, however one utility volunteered that they only charge the fee if test determines the meter is registering correctly. Hopefully all utilities follow this policy because the customer is probably doing you a favor if the meter test reveals the meter is registering incorrectly.
Return trip fee
When turning a meter on, most utilities will not leave the water on if the meter indicates water is running inside the house and no one is home. This requires the utility to make a return trip when the customer is home to turn the meter on again. Several utilities charge a return trip fee to cover the time and expenses involved in returning to the customer’s home.
Same day connection fee
A number of utilities routinely provide next day service for activating new accounts. A few of these utilities charge an additional fee for providing same day service.
Field collection fee
Most utilities have adopted the best practice of not collecting money in the field on cut-off day. At least one utility still allows customers to pay the field technician to avoid being cut off and they charge an additional $25.00 to provide that service.
A special offer
I still have a couple slots left for the special offer I’m offering to the first five Utility Information Pipeline readers who respond. If you are one of the first five to respond, I will conduct a personalized fee consultation for for one-third off the regular price! That’s $1,000 rather than the usual $1,500 price for this service.
I will review your utility’s current fee schedule and conduct an in-depth phone assessment to learn more about your fees. You will receive a presentation quality document illustrating how your fees compare with other utilities. Also included will be my recommendations for revising any existing fees and suggestions of new fees you should consider charging. An on-site presentation of the report can also be arranged for an additional fee, plus travel expenses.
If you are interested in this special offer, please contact me by calling 919-232-2320 or e-mailing me at firstname.lastname@example.org. Remember, the discounted special offer is only available to the first five people who respond.
© 2015 Gary Sanders
Continuing the theme from the last Utility Information Pipeline issue, this issue analyzes the early responses to the 2015 Utility Fee Survey regarding credit cards.
Early credit card acceptance results
Of the 41 responses so far, 37 responding utilities accept credit cards, an acceptance rate of 90%. Here is a graph of the results (clicking on the image will open a larger graph in a separate window):
This is a considerable increase from the 62.5% acceptance rate from the 2012 Utility Fee Survey. As a strong advocate of utilities accepting credit cards, I’m pleased to see this increase. In one of the first Utility Information Pipelines, I wrote about why utilities should accept credit cards.
Early convenience fee results
Of the 37 utilities accepting credit cards, 45.9% charge a convenience fee, as shown below(clicking on the image will open a larger graph in a separate window):
While these are early results and this is a smaller sample size than the 2012 Utility Fee Survey, this is a small increase from the 40% response from the previous survey.
I believe that accepting credit cards is a cost of doing business and charging a convenience fee is a bad business practice. One of the arguments I hear most often is “it’s not fair to our customers who don’t pay by credit card” to not charge a fee. In an upcoming Utility Information Pipeline, I will devote an entire issue to why I don’t accept this argument.
Still time to complete the 2015 Utility Fee Survey
If you haven’t yet participated in the 2015 Utility Fee Survey and would like to, please click here to complete the survey. It should take less than five minutes to complete.
If you have any questions, please feel free to e-mail me at email@example.com or call me at 919-232-2320.
I’m looking for as much participation as possible in the survey, so please feel free to pass this on to your colleagues at other utilities.
Thank you in advance for your participation in the Utility Fee Survey.
© 2015 Gary Sanders
If you’ve been reading the Utility Information Pipeline for any time, you’ve probably realized I’m a strong proponent of utilities accepting credit cards.
The most common excuse I hear for not accepting credit cards is “the fees are too expensive”. While it’s true there are fees associated with processing credit card payments, there are also ways to keep these fees to a minimum.
Utility program rates
In a retail environment, disputed charges and returns are two factors that impact the cost of processing credit card transactions.
Utilities don’t deal with returns and, by the nature of your business, have fewer disputed charges than retail merchants. For this reason, both MasterCard and Visa offer utility programs that provide significant savings over traditional retail merchant fees.
You can read more about these utility programs here:
Traditionally, these utility programs have required that you not charge a convenience fee to participate.
I’ve heard the new checkout fee rules have relaxed this requirement, but recommend you contact your merchant processor if you have questions.
Contact your merchant processor
Are you taking advantage of your merchant processor’s utility program rates? If you’re not sure, give them a call to find out.
Merchant processors want your business and it’s in their best interest to offer you the most competitive rates they can. If you feel like you’re paying too much in credit card fees, give your merchant processor a call and see if you can negotiate a better deal.
Are you providing enough ways for your customers to pay?
If you are interested in offering your customers more ways to pay or if you want to streamline the way you currently accept payments, 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 office.
© 2013 Gary Sanders