Why don't electric companies take credit cards?

June 22, 2008 6:10 AM

Why do electric utilities either not take credit cards for payment or charge ridiculously large surcharges ($5) to do so?

I've gotten into the habit of paying most of my bills via credit cards due to the cash back/skymiles. Every single company (phone/cable/etc) gladly take them, EXCEPT the power company. They send you over to some 3rd party who wants to charge $5 for the privilege of paying your bill with plastic. I did a quick check of the major power companies I'm aware of in Florida and all of them have similar services, although most charge $3-$4 instead of the $5 my local power company wants.

I'm fully aware of merchant fees & such, but find it odd that only power companies in this state seem to do this.

posted by OTA to work & money (9 comments total)

because they have a monopoly. it's the same reason you can only order cable channels in packs and have to put up with sub-par service at the dmv.
posted by krautland at 6:36 AM on June 22

Likely it is to recover the cost of processing that a business must pay the credit card company. If you pay by check or through direct debit, the power company does not incur these costs. So, if you want the convenience of paying by CC, then you carry the overhead cost to do so. They can get away with this because, as krautland said, they are the only game in town. Still, if you want to pay a company in a method that costs them more, it's hard to see how they should just eat it - especially if they would then need to spread the cost of CC payments to all customers.

A lot of small businesses do something similar by refusing to accept CC payments, or more likely, requiring a minimum purchase amount to cover these CC processing costs.

If you like the convenience of paying electronically, then you might look into using your banks online bill pay. If you are looking to get the points, cash-back, or milage on a CC, then you have to eat it, it seems.
posted by qwip at 6:51 AM on June 22

Oh, and I meant to add that many business specifically refuse AMEX for payment because the merchant fee is the highest.

So, to answer your question, power company = monopoly = make you eat the cost. Other businesses refuse, use minimum payment or raise prices for everyone to be able to accept merchant fees indiscriminately. Businesses that are trying to attract your business will build in the cost of CC processing fees into their goods and services.

I think the kick in the head is that if the power company initially did this to save cost, the savings likely never made it back to the people who don't use CC's.
posted by qwip at 6:56 AM on June 22

A little Googling brought up this document (pdf), which suggests that the regulator, the Florida Public Service Commission, allowed some companies to recover the credit card fee, presumably to prevent other utility users from paying for your skymiles. However, credit card companies get upset when credit card users are charged differently than non-credit users, and threatened to stop accepting payments. The workaround, apparently, is to outsource the payments to a third party who charges an even bigger fee. It makes no sense, I know.
posted by blue mustard at 6:57 AM on June 22

or more likely, requiring a minimum purchase amount to cover these CC processing costs.

which is a merchant violation that can cost them their cc terminal if you report them.
posted by krautland at 7:33 AM on June 22 [5 favorites]

In general, utilities are still regulated. There's a limit to what they can charge, so the %age taken by credit card companies is significant. The cash back/skymiles cost the credit card company. That gets passed on, along with the costs of credit card fraud and delinquent borrowing. Also, there's a strong feeling that credit cards should not be used for essential services, because some people can't handle credit.
posted by theora55 at 8:23 AM on June 22

Krautland points out the rules from Mastercard. My experience about such rules is, the credit card companies do squat about rules violations, unless they get "enough" complaints. 10 years ago I had American companies refusing to accept my German-issued Visa card (for no good reason), and Visa, for all their adverts, didn't really care.
posted by Goofyy at 9:38 AM on June 22

Utilities make a profit margin that is, in the case of regulated utilities, PUC or government-approved. In some cases, paying an extra x% to the CC companies would cut into that approved margin, with all sorts of problems resulting.

In other cases, though, paying that % can work out to be cheaper than paying someone to open your letter, take out your check, and key the info into a computer.
posted by charlesv at 9:49 AM on June 22

Sweet link krautland. I just ratted on a local restaurant which requires a $10 minimum - something which has consistently caused me grief.
posted by wfrgms at 9:56 AM on June 22