Are you paying too much in credit card fees?

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:

Convenience fees

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 gsanders@logicssolutions.com to learn how a business review could help your office.

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© 2013 Gary Sanders

How can I reduce walk-in payments in my office?

Recently, a customer inquired about ways to reduce walk-in payment traffic in their office. Unfortunately, there are no easy answers to this question because several key factors are out of your control.

Factors impacting walk-in traffic

In my experience, the biggest factor affecting walk-in traffic is the demographics of your customer base. Utilities that serve older or more low income populations tend to have more walk-in traffic than those serving younger or more affluent communities.

Another factor that seems to impact walk-in payments is the location of your office. Offices that are in the central business district of most small or mid-sized cities and towns are likely to have more walk-in traffic than if they were located farther out of town.

But there are a few things you can do that might entice your customers not to visit your office to pay each month.

Bank drafts

Simply put, bank drafts, or ACH payments, are the easiest way to collect payments. You collect your customer’s banking information, create an ACH file, send it to the bank and your billing system creates payment transactions for each bank draft customer. If it’s not that simple with your billing system, it’s time for new software.

Do you aggressively market your bank draft program to your customers? Some utilities ask every new customer if they would like to sign up to pay by bank draft. Have you purchased a life insurance policy lately? That’s exactly how they do it.

Periodic bill inserts is another way to publicize and market your bank draft program. Be sure to include a bank draft enrollment form with your bill insert.

Online bill pay

An integrated online bill pay system not only provides your customers with a convenient way to pay, it also can answer many questions that would otherwise require a call to your office, reducing both walk-in traffic and phone calls. Does it get any better than that?

An effective online bill pay system should provide answers to the questions most frequently asked of your customer service staff:

  • How much is my bill?
  • When is it due?
  • Did you receive my last payment?
  • Can I pay online or over the phone?
  • How does my usage compare to previous billing periods?

IVR payments

Another way to limit walk-in payments is an IVR (interactive voice response) system. Interactive voice response systems provide a way for your customers to pay by phone even when your office is closed.

After all, what have you accomplished if you offer phone credit card payments as a way to reduce walk-in payments and it takes a customer service representative longer to process a payment over the phone than it did face to face?

Convenience fees

Any discussion of credit card payments always leads to questions about convenience fees. Should you or should you not charge a convenience fee?

In my opinion, if you are implementing online bill pay or IVR payments as an alternative to walk-in payments, then you shouldn’t charge a convenience fee. If you truly want to see a decrease in foot traffic in your office, you should do all you can to encourage your customers to pay through other means, including removing any impediment such as adding a convenience fee.

Are you ready to try something different?

If you are interested in reducing walk-in payments, or solving any other customer service issues, please give me a call at 919-232-2320 or e-mail me at gsanders@logicssolutions.com to learn how a business review could assist you with the process.

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© 2013 Gary Sanders

Checkout fees – what does it mean for your utility?

Statistics for my blog indicate that the article about convenience fees continues to be the most popular. Apparently, lots of people are searching the internet to learn more about charging convenience fees.

Checkout fees now allowed

If you’ve read my newsletter or the blog post mentioned above, you know that whether or not you can charge a convenience fee is based on how you received the payment.

All that has changed. You may have seen in the news that, effective January 27, 2013, retailers can now charge “checkout fees” for Visa and MasterCard transactions. This is the result of the Interchange Settlement as a result of a class action lawsuit brought by retailers against banks and Visa and MasterCard.

I’m not an attorney, but my research leads me to believe that, in this context, a retailer is any entity that accepts credit cards, including municipalities and utility districts.

Rules for charging checkout fees

If you opt to start charging a checkout fee, you must follow some rules. These include notifying your customers of the checkout fee at your entrance, at the point of sale and on the customer’s receipt. I’ve read some advice that recommends issuing separate receipts for the purchase and the checkout fee.

Checkout fees can only be charged for credit card transactions, not debit card or prepaid cards. The checkout fee also cannot exceed what you are charged to process the credit card transaction, up to a maximum of 4%.

Ten states are ineligible

If your utility is in one of the following 10 states where check-out fees are already illegal, the Interchange Agreement didn’t accomplish anything for you. These 10 states are:

  • California
  • Colorado
  • Connecticut
  • Florida
  • Kansas
  • Maine
  • Massachusetts
  • New York
  • Oklahoma
  • Texas

However, if you are located in one of the remaining 40 states, I believe you can now charge a checkout fee for credit card transactions, regardless of how the payment is received.

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© 2013 Gary Sanders

Looking back at 2012

Believe it or not, this issue marks the second anniversary of the Utility Information Pipeline! As 2012 draws to a close, it seems appropriate to take a look back at the year…

Newsletter subscribers

Over the course of 2012, subscribers to the Utility Information Pipeline increased by 25%. I’ve received several e-mails and phone calls from subscribers complimenting me on the content of various articles. It’s always good to know that people read (and appreciate) what I write!

With that in mind, if you have co-workers or colleagues who you feel would benefit from subscribing to my newsletter, please take a minute and forward this to them.

Most popular blog posts

If you aren’t aware, I post each Utility Information Pipeline issue to my blog as an archive of past issues. Instead of searching through old e-mails to look for previous issues, my blog is a great resource to find them.

Search engines also send traffic to my blog. Based on web searches, the three most popular blog posts this year have been those dealing with convenience fees, Intelligent Mail barcodes and meter reading best practices.

Speaking of Intelligent Mail barcodes, the deadline for implementing IMb is January 28, 2013. If you are currently receiving automation discounts from the Postal Service, and are still printing POSTNET bar codes, those discounts will expire on January 28.

New, mobile device friendly e-mail format

MailChimp, the e-mail service I use to send these e-mails, recently updated their e-mail templates to include more mobile device-friendly options. This e-mail is the first I’ve sent using the new template, so if you read the Utility Information Pipeline on your phone or tablet, please let me know if this issue looks different (aka better) than previous issues.

I’m always looking for ideas for articles

After two years, I’m not completely out of ideas for articles, but I don’t have a huge backlog of topics like I did when I 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 gsanders@logicssolutions.com.

Happy New Year!

I wish you and yours all the best for a healthy, prosperous 2013!

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© 2012 Gary Sanders

2012 Utility Fee Survey Results – Part III

Editor’s Note: The 2015 Utility Fee Survey is now complete and you can see the results of that survey here:

2015 Utility Fee Survey Results – Part I

2015 Utility Fee Survey Results – Part II

2015 Utility Fee Survey Results – Part III

This is the last of three consecutive Utility Information Pipelines reporting the results of the Utility Fee Survey. Eighty-eight utilities, from 15 states, ranging in size from 200 to 168,500 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. Last week’s issue dealt with delinquent fees and policies. Today’s issue explores the remaining fees.

Clicking on any of the graphs will open a larger image in a new window.

Returned check fees

Of the 88 participating utilities, 86 charge a returned check fee. Returned check fees range from $15.00 to $50.00, as this graph illustrates:

Application fees

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 46 of the 88 utilities (representing 52.3%) responding to the survey charge such an application or administrative fee. These application fees range from $5.00 to $100.00 as shown below:

Meter reread fees

Sixteen of the eighty-eight utilities (or 18.2%) charge a meter reread fee if the customer requests their meter be reread. 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 $8.00 to $50.00 as this graph shows:

Meter tampering fees

Fifty-three of the eighty-eight utilities (or 60.2%) charge a meter tampering fee. Six utilities charge the actual cost of repairs or cost plus an administrative fee. The remaining 47 utilities charge a flat fee ranging from $15.00 to $1000.00 as shown below:

Convenience fees

One of my earliest issues last year explained why I believe utilities should accept credit cards. I’m pleased to see that, of the 88 utilities responding to the survey, 55 of them (or 62.5%) accept credit cards. Of the 55 that do accept credit cards, 22 of these charge a convenience fee on at least one form of credit card payments as shown below:

As you can see, six utilities assess a convenience fee for over the counter payments. If you read Utility Information Pipeline #22, you know that, unless you are in a state with specific legislation allowing you to do so, Visa and MasterCard do not allow convenience fees for over the counter payments, so these six utilities are potentially in violation of their agreements with Visa and MasterCard.

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.

Other fees

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:

Letter of credit fee

Customers who have moved away often request a letter of credit reflecting their payment history while they were customers. One utility charges a $5.00 fee to provide a letter of credit. Your staff must take time to prepare the letter of credit and send it to the requesting utility, so why not charge a fee for providing this service?

Payment extension fee

Many utilities offer payment extensions to customers who may not be able to pay their bill by the due date. One utility assesses a $5.00 fee per payment extension. Having to pay an additional fee to extend the payment date may well be all it takes to convince your customer to go ahead and pay the bill now. If not, it provides an additional source of revenue when they do pay.

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 utilities charge an additional fee for same day service and one even charges more for same day service late in the afternoon than they do for earlier in the day.

A special offer

I’m offering a special offer to readers of my blog. If you let me know that you read this here, I will conduct a personalized fee consultation for a 20% discount. That’s $800 rather than the usual $1,000 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 gsanders@logicssolutions.com. Remember to let me know that you read this on my blog when you contact me.

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© 2012 Gary Sanders

Is this a metric you should be tracking…?

If you’ve been reading the Utility Information Pipeline for any length of time, you’re probably aware that I’m an outspoken proponent of utilities accepting credit cards. In fact, I wrote about this all the way back in Utility Information Pipeline #4 (you can read it here if you missed it).

During a presentation of our software to a progressive utility recently, we had a discussion about payment methods. In the course of conversation, they mentioned they do not charge a convenience fee for credit card payments.

Reducing in-office payments

By implementing IVR and online bill pay, this utility reduced the number of in-office payments handled by their staff from 40% of all payments to 22%. Remember, I said this was a progressive utility, so they were already offering bank drafts, using a lockbox for mail payments and receiving online banking checks electronically.

Their rationale for not charging a convenience fee and absorbing the cost of processing credit card payments is they are not creating a deterrent to their customers paying by credit card. This, in turn, has reduced the number of payments processed in the office due to:

  • fewer walk-in payments
  • phone credit card payments are no longer handled by a customer service representative
  • more ways for customers to pay

What office wouldn’t want to reduce the number of payments processed by their staff?

Growth without adding staff

This reduction in the number of in-office payments has allowed this utility to continue to grow while moving from bi-monthly to monthly billing without adding any additional staff. Now, that’s impressive!

Even if you don’t have plans to bill twice as often, as this utility did, wouldn’t allowing your staff to spend less time processing payments be a good thing?

Do you know how well your office is doing?

Do you have a feel for what percentage of payments are processed in your office? If not, is this a metric you should start tracking…?

If you have taken steps to reduce the number of payments processed in your office, I would love to hear what you’ve done and you can click here to post your comments.

If you are interested in reducing the number of payments processed in your office or becoming more efficient in other ways, please contact me by calling 919-232-2320 or e-mailing me at gsanders@logicssolutions.com to see how a business review could help your utility.

Click here to subscribe to my free, bi-weekly e-mail newsletter...

© 2012 Gary Sanders