Verizon has announced that they will begin charging customers a $2 fee for paying their bills online via credit card, in order to “continue to support these single bill payment options in these channels and is designed to address costs incurred by us for only those customers who choose to make single bill payments in alternate payment channels (online, mobile, telephone),” the company says.
While the fee applies to one-time online payments, there will be no charges for using the company’s AutoPay option, which will pay your bill automatically each month via either credit/debit card or directly from your bank account.
Not totally surprisingly, there was a lot of uproar online about the new fees, with GigaOm calling it an “excessive” charge.
But $2 not only seems excessive; it runs counter to the policy that Verizon and all service providers – whether wireless, wireline, cable or utility – have implemented in recent years: cutting the enormous cost of issuing and sending paper bills and processing hand-written checks.
One of Verizon’s obvious goals is to get people to enroll in AutoPay, in order to ensure that they get paid each month and have fewer customers to chase for payments.
Since the AutoPay option still accepts credit cards (meaning Verizon still has to pay credit card processing fees), they can’t just argue the change is just about processing fees, says GigaOm. However, according to the NY Times:
Those one-time payments cost Verizon money since it must pay merchant fees to card companies and others. The amount it costs Verizon to accept cards in stores could be less because of quirks in how the card companies set fees. It may also be willing to swallow the costs of accepting cards in its stores in exchange for the opportunity to sell upgrades to people who come in to pay their bills.
Surely, many of the folks who enroll in AutoPay use their bank accounts to make the automatic payments and not their credit cards. That also reduces the costs for Verizon, and I think points to a bigger trend coming down the pipe in the industry.
New services like Dwolla (which I need to cover more in the future) facilitate bank-to-bank payments, going around the credit card companies and the associated fees. Any consumer or merchant wants as few hands as possible on every transaction, because it means fewer costs to do the transaction. That’s likely something Verizon is looking at, as well.
Honestly, I don’t really mind the new Verizon fee. You can say it’s silly, because they don’t charge a fee to come into a store and pay your bill (where there are a ton of overheads costs — people, the store, etc.). But the folks who come into the store to pay their bills most of the time wouldn’t be paying online, anyway, and forcing them to make that switch by adding in-store fees would result in a bigger backlash than this effort.
What do you think? Is Verizon in the wrong, or is this a legitimate business decision?
About the author: Jason is the author of Automatic Finances: 17 Days to Your Financial Freedom, a guide to automated money management. He started investing thanks to a free lunch, and after finding out how he was getting the short end of the stick, he sought out how to do it right. More »