By AnnaMaria Andriotis
UPDATE: Verizon abandons $2 fee
A cryptic statement by Verizon Wireless today has many consumers wondering, “what gives”? And they’re not alone. The banking industry is saying Verizon’s stated reasons for charging a $2 “convenience fee” beginning next month for customers who make single bill payments online or by phone could be unfounded.
Here’s the rub: Cell phone users who make single bill payments – rather than say set their monthly payments on autopay – often pay with credit cards or debit cards. Though Verizon’s statement doesn’t provide many details, the company says its new fee is addressing the “costs incurred” from these customers. Experts say that could likely boil down to the so-called interchange fees, which companies are charged by card issuers each time consumers use their debit card or credit card to pay for something.
But those fees haven’t risen, and the American Bankers Association says it’s confused by the company’s new fee. To begin with, credit card interchange fees, which typically range from 1% to 3% of the total purchase price, haven’t changed, says Nessa Feddis, vice president and senior counsel for regulatory compliance at the American Bankers Association.
Meanwhile, interchange fees on debit cards actually fell this year from 44 cents on average per transaction to roughly 21 to 24 cents. That means most companies pay less in fees to card issuers each time consumers use their debit card.
The average monthly cell phone bill comes out to about $47, according to the CTIA-The Wireless Association; so $2 would appear to be in excess of the interchange fee imposed with debit or credit. So why charge this $2 fee now?
It’s possible that the phone company’s bank that processes the debit card might charge a fee, but it would also charge a fee for check deposits and other transactions, says Feddis. In its company statement, Verizon said it wouldn’t charge the fee if customers pay in several other ways, including electronic or paper checks. Of course, it’s also possible the company is referring to a different fee. Verizon did not immediately return calls for comment.
Experts say it might be an attempt to get more customers to sign up for automatic payments, which help guarantee on-time delivery of the funds. Or perhaps it could be another example of a company trying out a new fee – and seeing if it sticks.