Erm… and if you send in a check, how much does it cost them to process that/ Truth is, they already factor in the administration costs and the “convenience fee” is just a way to charge more money.

I know in this great, capitalist country, squeezing the last dime out of your customers is applauded. (Yes, that was a bit sarcastic – there are lots of things I do like about the US). It doesn’t just stop at convenience fees, other “hidden” fees often apply when making a purchase, or entering into an agreement with a service provider. At least in the European Union, all fees has to be included in the advertised price up front. No need to rob the customers blinds through the backdoor.

Taxes are low risk, because payment is enforced by law. Still that fee sounds low – you might actually be paying a wire transfer fee and not a merchant account fee.

Let’s say a 50,000 member electric cooperative has 1% (500) of its customers pay their bills online without a convenience fee — the utility would pay all associated transaction fees. Online credit card payments carry about a 3% rate of the total transaction amount. With an average payment of $100 per month ($600,000 total), the utility winds up paying 3% over the course of a year, or $18,000.00.

That’s just to let ONE PERCENT of their customers pay their bills online. Having been a cashier in college, I do believe this at least rivals the average salary of a cashier. The national average for online utility payments is around 5%, so throw in another 4% paying online, and your utility has just paid $90,000.00 in the last year to let those customers pay with a credit card. Clearly it’s not as cheap to take credit card payments as it may seem. And those are just the credit card fees themselves. We haven’t even begun paying for the media for taking those payments that have to be in place, like a bank draft, Web site, or telephone IVR interface.

As I pointed out earlier… utilities are usually non-profit or not-for-profit and simply charge the customer according to the customer’s usage shown by their utility meter. The utility simply provides the medium to get the product (electricity, gas, water, etc) from the wholesaler to the customer and typically do not have “bottom lines” to improve. Apart from personal incomes of utility employees, utility charters do not allow operation as a profitable entity as a corporation like Abercrombie and Fitch or Sony would. The utility would find it difficult, just as you or I would, to invest in new ways of providing services regardless how affordable those services may be compared to alternative methods. You’re “buy-one-get-one-free” coupon does little good if you can’t afford the first object to begin with.

Now imagine you’re a utility who can’t afford to include credit card payments in your budget, yet your members demand online bill pay via credit card. They even tell you they would gladly pay to make it happen. What do you do? The convenience fee model is actually a win-win situation made possible by the demand of utility customers themselves. I agree, convenience fees from for-profit organizations like my favorite antique dealer are not only strange, they also go against nearly every credit card merchant agreement to date. But for not-for-profit organizations they provide an opportunity not possible otherwise, and the credit card companies’ concession to them for the utility industry as of late is ample evidence of that.