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Charging Kwhs and BTUs on Credit

Fortnightly Magazine - September 15 1998

of their payment offices. They've looked to card acceptance as a way of enhancing customer service levels when they're potentially cutting back services.

"Utilities have told us that by reducing the number of customers that come into the payment offices, they actually save money," he says. Why? Walk-up transactions are labor intensive, and therefore more costly.

"As competition increases and more and more utilities begin accepting and those that offer recurring payment or one-time payments, they begin to differentiate themselves from the incumbent utility," Holmes says. "You will see more card acceptance and more recurring card acceptance."

Research shows that about one-third of all consumers say they want the option of using a Visa card to pay for a variety of bills, including gas, water and electric bills. Yet when asked if they would opt to pay on a card, less than 10 percent said they would.

Holmes says that's more a factor of customers not being familiar with how to go about charging their utility bills.

And that's what his company and other credit card companies hope to change - soon.

Joseph F. Schuler Jr. is senior associate editor of Public Utilities Fortnightly.

Understanding Recurring Payments

What do Consumers think?

A recurring payment, or RP, is an arrangement whereby a consumer authorizes a merchant or service provider to bill against one of his accounts at set periods. RPs aren't as widely accepted by consumers and merchants as checks or debits against bank accounts. A 1996 study by the National Consumers League and the Opinion Research Corp. found that 20 percent of its respondents who own credit cards have used them to make RPs. Fifteen industries account for more than $500 billion in RPs, including telecommunications and utilities.

The most popular method for paying recurring bills is writing checks (93 percent).

36 percent of consumers use automatic deductions to pay at least one of their recurring bills, typically bills that are less than $100 and for fixed amounts.

Some 82 percent of respondents are aware that recurring payments can be paid with credit cards.

Some users are motivated by perks or discounts, including frequent flyer programs. About 41 percent of consumers indicate a greater likelihood to use RPs by credit card if incentives were offered.

About 31 percent of users say they're uncomfortable with the loss of control inherent in the RP method. Some 23 percent, typically those who carry a balance month to month, are concerned about accumulating debt on which interest can accrue. They cite temptation to float their debt.

The motivation to use RPs are convenience (42 percent), merchant insistence (35 percent), acquisition of discounts and rewards (10 percent) and the timely payment of bills (10 percent).

About one in four consumers (24 percent) said they would switch away from a company if a competitive merchant offered a RP option.

Source: MasterCard International Consumer Research; Recurring Payments Report, 1997.


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