Note: Since this post was originally written, Verizon has recinded its decision to add this payment surcharge. See Reuters story for the details. In many ways, Verizon’s action is not much different from what happens in the Airline industry when one airline proposes a price change and waits to see if others follow. If none do, the increase is quickly recinded. The point made in this post is still true, Verizon wanted the surcharge so that it could charge less credit-worthy customers more than its customers with a more secure financial position. [Note added 12/30/2011 at 7:57]
The Huffington Post reports today that Verizon will be charging its customers $2 if they pay a bill using a credit card or debit card on a per statement basis. Interestingly enough, Verizon does not propose to charge customers that pay by mail, use other forms of electronic payment, or pay in-person at a Verizon retail store. As expected, the charge has raised a significant outcry in the blogosphere and has generated the suggestion on a CNET message board that every Verizon customer should mail in a check to them rather than paying online, in order to shut down their bill processing.
Why would Verizon do this?
The Consumerist reports that Verizon states that it is adding the fee to address costs incurred by us for only those customers who choose to make single bill payments in alternate payment channels (online, mobile, telephone). As consumers can use debit and credit cards for automatic bill payment options, the costs that Verizon is talking about has nothing to do with the cost of handling the transaction. Instead, Verizon is focusing on setting that will apply only to its customers that are the least reliable in paying their bills.
Verizon’s costs of serving less reliable bill payers include:
- a minimal interest cost associated with a delay of depositing payments and
- additional mail and other collection costs that are associated with customers that don’t have an automated payment system.
While customers that pay by mail are costlier to serve than customers that pay on line, Verizon has not and will not institute a similr charge for customers that pay by mail for three reasons:
- The public outcry over charging for payment by mail would be even greater.
- The number of customers that pay by mail are shrinking on thier own and no incentive is needed to continue this trend.
- Customers that pay by mail are generally older and more responsible in paying their bills on time.
While Verizon will take some flack, its decision to impose a fee will not change. In fact, other mobile carriers will do the same, once the commotion dies down. If they could, public utilities and cable companies would follow suit as well. If that happens, then telecommunications and utilities would become just another service that those with the most tenuous hold on their finances pay more for.