Charging Kwhs and BTUs on Credit

Fortnightly Magazine - September 15 1998
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Credit card companies say they're seeing an increase in volume for energy transactions despite claims by utilities that it costs more for them to receive monthly bills on plastic.

As proof of their desire not to take the credit card route, the utilities that allow customers to pay with a card don't always promote that option.

Holding utilities back are the transaction fees they pay for bill processing. These fees can run as high as 3 percent or more. If a customer doesn't pay the full card balance each month, the servicing bank profits even more. Some utilities, none willing to be named, have tried passing fees on to customers, without much luck. Furthermore, regulatory commissions typically question any costs billed to all ratepayers to fund services used by only a few.

Regardless of the fees, however, Visa U.S.A. Inc. saw total volume for natural gas, electric and water utilities for 1997 rise to $350 million, denoting an 81-percent increase over the year before. This year, Visa is on a 60-percent growth spurt within its utilities sector, meaning potential annual volume of nearly $600 million. Visa's 1997 telecom revenues topped $1.7 billion.

Gas, electric and water utility credit card volume for 1998 could easily top $1 billion when the activity of other credit card companies is included, says Gregory J. Holmes, Visa's director of recurring payment industries.

The number of utilities accepting cards also is growing. Some 8 percent of utilities accepted cards in 1995, whereas 20 percent did in 1997, according to two Visa surveys (see Table 1).More than 79 percent of American households carry a credit card, according to MasterCard International.

The Price of Plastic

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