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HomeDEPARTMENTSUtility BillingPayment Options > Why is there a 'convenience fee' for credit card payments?
Why is there a 'convenience fee' for credit/debit card payments?

Questions about Convenience FeesEach time a person utilizes a credit card for purchases of goods or services, the credit card companies charge that entity a fee for the customer’s use of said card for that transaction.  Most cities (and other public entities) accept credit/debit cards as a courtesy, offering a convenient payment option to their customers.  How they address the fees are uniquely individual to the entity, but increasingly over the past few years many cities have begun to pass this cost along to the customer to help offset the cost of offering this convenience.  

In the past, all credit card processing charges levied by third party processors had been absorbed by the City of Melissa and this expense had to be calculated and considered when establishing utility rates annually.  What this meant is that all customers, whether they paid by credit/debit card or not, had been paying for those that utilize the convenience of paying their utility bill with a credit/debit card. 

With the percentage of those paying by credit/debit card continuing to increase and as a matter of equity, along with the timing of switching to a new billing system, City Council determined it was appropriate to pass those costs for credit/debit card processing onto those customers who choose to continue to use this form of payment.

Why was this ‘fee’ implemented now?
The Melissa City Council last considered this move in March 2010 when the City first began offering online bill payment.  At that time it was decided to continue to absorb the costs as part of the utility rates.  Since then Utility Billing has seen its number of customers paying their monthly bill by credit/debit card more than double and the associated costs of providing this convenience has increased to approximately five times the amount in 2010.   

At the time of Council's approval of the ordinance authorizing the collection of this 'convenience fee' on June 23, 2015, approximately 56% of our utility billing customers paid their monthly bill using a credit/debit card with the convenience fees associated with these credit/debit card payments exceeding $65,000 for this past fiscal year and projected to approach $100,000 in the next year or so with the anticipated growth. What was previously a small portion of the utility billing departmental budget had now become a significant expense. 

Additionally the City’s new partnership with FATHOM included a move to a new billing software and online payment system, and the City had to make this determination of how these fees would be handled in preparation for the October rollout.  Had the City Council not authorized the collection of this fee this past summer, the City's customer care partner FATHOM would have instead paid the third party processing charges (2.8% per transaction) and later billed those charges back to the City.  The City would then have had to continue to absorb those charges and with the projected increase making this a significant expense, this would have to again be factored into establishing the utility rates for all customers.  This move to pass through the processing charges was one of the factors that allowed the City to not raise water and/or wastewater rates heading into the FY 2015-16.

Is FATHOM or the City collecting this new 'convenience fee'?
No - this is not a fee collected by the City of Melissa or our Customer Care partner FATHOM, but rather this fee is passed through DIRECTLY from the credit card processor to the customer at the time of the transaction. 

It is also important to note that Texas State Local Government Code allows a municipality to charge up to 5% to cover this expense.  The City of Melissa is only charging 2.8% or $1 (whichever is higher) - the same percentage that is charged by FATHOM’s third party processor.  Making this ‘fee’ a true pass through and not an additional ‘convenience fee’ being paid to the City or FATHOM.

Do other cities charge this sort of 'fee' to their customers?
The City of Melissa is not alone in exercising our right to pass through these charges to our customers.  An increasing number of cities (and other public entities) have seen the number of customers paying fees for service by credit/debit card increasing to the point that the levied processing charges are becoming quite excessive too much to just absorb.  With legislation enacted by the State of Texas in the last decade authorizing passing this fee along, many have made the determination to assess a 'convenience fee' or pass through these charges to the customer.   

Below is the link to the Texas State Local Government Code that gives the legal authorization for payment of fees and other costs by credit card or electronic means in municipalities and counties, as well as the City of Melissa Ordinance authorizing the collection of said fees:

shutterstock  payment optionsStill prefer not to pay a ‘convenience fee’ – no worries, there are still a number of self -serve payment methods available to you.  These methods include ACH, online bill pay through your own bank, e-check payment via the online portal, iOs app or 24 hour automated phone system. 

Of course there are always the more traditional payment methods of check or money order which can be mailed or made in person or dropped off curbside at City Hall.  Finally cash payment may be made in person at utility billing during regular business hours.

Should you have further questions, please email ub@cityofmelissa.com.

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