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
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 firstname.lastname@example.org 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 ever asked a question and gotten the dreaded answer of “that’s the way we’ve always done it,” then your organization could be suffering from what I call TTWWADI syndrome.
Is TTWWADI syndrome holding you back?
Back in the day, the 3 R’s referred to reading, writing, and arithmetic.
In an office afflicted with TTWWADI syndrome, the 3 R’s refer to resistance, reluctance, and refusal.
I’m surprised at how often I run into utilities that are resistant to change. Do any of these situations sound familiar to you?
Is the same old way always the best way?
The TTWWADI syndrome isn’t found only in the failure to take advantage of new technologies. Often, antiquated ways of doing things become institutionalized in organizations to the point they are never questioned.
Sometimes, doing things the same way for years makes sense. But other times, when we stop to think about it, many practices – especially informal processes that have developed over time – no longer serve a useful purpose.
In forward thinking organizations, questioning why things are done a certain way isn’t chastised, it’s welcomed!
In forward thinking organizations, questioning why things are done a certain way isn’t chastised, it’s welcomed! If you do something a particular way with no real reason for continuing to do it that way, it behooves you to question why you’re still doing it.
Many times, those closest to a process are oblivious to how redundant or useless it has become. A knowledgeable, objective outsider observing and asking why things are done a particular way can lead to constructive discussions and improvements in how things are done.
Is it time to consider a business review?
Do you ever wonder if your office could be run more efficiently? Or would you just like confirmation that you’re doing things the right way?
In either case, please give me a call at 919-232-2320 or e-mail me at email@example.com to learn how a business review could benefit your organization.
© 2014 Gary Sanders
Being somewhat nostalgic, it’s only natural, as we bid 2013 farewell, to look back at the year…
This issue marks the third anniversary of the Utility Information Pipeline. Readership continues to increase, by nearly 12% this year, as it surpassed 300 subscribers.
If you have co-workers or colleagues from other utilities who you feel would enjoy reading this newsletter, please take a minute and forward this to them.
And, on August 9 of this year, by blog reached a milestone with the 10,000th hit!
If you haven’t checked out my blog recently, I encourage you to do so. Each Utility Information Pipeline newsletter article is also posted to my blog as an archive. So if you’ve deleted an old newsletter e-mail that you wish you still had, try searching for it on my blog.
Most popular blog posts
For the second year in a row, convenience fees was the most popular blog post topic. This year, it was by a margin of more than two to one over the next most popular post. Here are the five most popular blog posts in terms of page views in 2013:
- Can we charge a convenience fee for credit card payments…?
- How much is your late fee?
- How is your general ledger reconciliation going…?
- Are you following these meter reading best practices?
- Intelligent Mail barcodes – are you ready…?
Looking ahead to 2014
It wouldn’t be the New Year without something to look forward to! For 2014, I’m planning to conduct an update to the Utility Fee Survey that was originally published in 2012.
I’m also contemplating a makeover to my blog, so be sure to check back to see if I’ve decided to get creative and try something new!
After three years, topics to write about aren’t as easy to come up with as they were when I first started! If you have an idea or suggestion of a topic that you would like to learn more about, please give me a call at 919-232-2320 or e-mail me at firstname.lastname@example.org.
Happy New Year!
Wishing you and yours all the best for a healthy, happy, prosperous 2014!
© 2013 Gary Sanders