Verizon drops fee for paying with plastic
The good folks of Basking Ridge, N.J., must have been choking on the stench of burning rubber last week. The source of the noxious fumes? The headquarters of Verizon Wireless within which had been performed one of the most spectacular U-turns in recent commercial history. On Dec. 30, just days after announcing its plans to institute a $2 convenience fee on online or telephone single payments using debit and credit cards, Dan Mead, the company’s president and chief executive officer, issued a statement:
At Verizon, we take great care to listen to our customers. Based on their input, we believe the best path forward is to encourage customers to take advantage of the best and most efficient options, eliminating the need to institute the fee at this time.
Credit cards and convenience fees
The idea of charging convenience fees for debit and credit card use isn’t entirely new. There’s a good chance you already do so if you use plastic to pay your power bills or for some government services. And back in June 2011, the IndexCreditCards.com news blog reported that UCLA had started charging a 2.75 percent fee to those students who choose to pay their tuition and fees, housing costs, parking permits and so on using certain credit cards.
None of this is good news for credit card companies, which are anxious to encourage people to use their plastic on as many occasions as possible. That’s so they maximize their revenues from the “interchange” fees (the cut of the transaction value) that they receive every time a card is swiped.
Indeed, both MasterCard and Visa ban the levying of supplementary charges (sometimes called “checkout fees”) for card use in their general merchant agreements, and encourage customers to report retailers and others who try to tack them on. What isn’t banned is offering a discount to those who pay by cash, check or PIN debit card. According to Visa’s website:
Retailers can encourage their customers to use other forms of payment, such as cash and checks, and can discount for PIN debit and cash and checks provided that the offer is made to all respective buyers.
Visa also reminds customers that it’s illegal to charge checkout fees for credit card use in most circumstances in 10 states: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas.
Credit cards remain a good way to pay
Given half a chance, many merchants would probably love to cover the cost of processing credit card transactions by levying checkout fees. But it’s unlikely that many CEOs are going to set themselves up for a repeat performance of Dan Mead’s climbdown any time soon. So maybe Verizon has done cardholders (and credit card companies) a favor by deterring others who might otherwise have been similarly tempted to challenge the status quo.
