[BETA] Fortnightly

We won't move to credit cards until our customers demand the option.

EVERY DAY, CUSTOMERS OF PUBLIC utilities ask the same question: "If I can buy my gasoline, grocery, medicines and all other necessities with plastic, then why can't I pay for my electricity, water, gas and telephone bills that way?"

Public utilities (em except long-distance telephone companies (em have yet to enter full-blown competition. When they do, utilities should decide whether to pursue the credit card option.

A utility will base such a decision on cost of accepting credit cards versus retention in the customer base. About

2 percent of each credit card transaction would be lost to processing fees. For example, if a utility with revenues of

$1 billion accepts credit cards, it will incur fees of $2 million if it receives only 10 percent of customer revenues through these transactions. One solution is to charge the customer this fee, but right now most utilities can't take advantage of this option.

But there are other issues too. For instance, nobody expects utility sales to increase from credit card use, as in other industries. The typical utility customer only uses the electricity, gas and water she needs when she needs it. And, of course, there is always fraud.

Ultimately, customer demand will decide whether utilities accept credit cards.

What Bankers, Consumers See

According to industry sources, billions of credit cards circulate the world. Credit card transactions are growing at a pace of 20 percent per year. Consumers are charging billions of transactions for more reasons than credit.

The "convenience card holder" charges everything he purchases on one credit card and pays it off at the end of the month. This type of cardholder does not want to be bothered with cash, coins and checkbooks on a daily basis.

The "real credit card holder" is the one who uses the credit feature of the card to finance her needs, comforts and luxuries (em the traditional marketplace of credit cards.

The "bargain hunter credit card holder" holds several credit cards and always charges every possible expense on one of these cards trying to gain frequent flyer miles, free hotel or motel accommodation, free rental cars, free gasoline or rebates wherever she can find them. Most often she pays off all the card balances promptly at month-end.

And of course, there are consumers who fit into a combination of the above categories.

Besides consumers, there are corporations and businesses using credit cards to simplify their operations and reduce the cost of purchasing transactions. The corporate purchase card transactions are growing at a swift pace.

Banks, recognizing that they will derive more of their revenue from fees and not interest rate differentials between deposits and loans, are aggressively promoting credit cards both to the consumer and the corporation.

A credit card transaction (em from dining out to purchasing a pair of shoes (em involves five parties: a customer, the bank that issued the credit card, a merchant, the bank that processes the transaction and with whom the merchant signed an agreement and an interchange network.