When an organization is employing IVR Payments, there are two payment modals commonly used; Credit cards (including debit cars) and ACH payments. ACH payments (aka, eChecks) don’t have any NACHA restrictions on service fees, which are also known as convenience fees or surcharges. Credit cards are a bit trickier. More on that later.
The first thing an organization or business needs to consider is the impact of charging a convenience fee. Corporate culture, type of customer and other factors weigh into the decision. Let’s us a real-world example to illustrate this: Two financial institutions are both using IVR payments as a method of streamlining their inbound loan payment remittance. These two financial institutions have arrived at a different decision on whether to charge a convenience fee for IVR payments. One is lending to consumers for mortgages and auto loans. The other is lending to businesses for equipment finance.
While I’m not privy to all the internal discussions that took place in either of the organizations, they arrived at different decisions. The institution charging the convenience fees is the one lending to consumers. The institution not charging is lending to businesses. That said, the institution not charging clearly either saw that there might be some negative results from doing so or they are simply happy enough to provide an alternate inbound payment method that reduces customer service representative time spent taking payment information over the phone. It’s ultimately up to the organization, and one question they will ask themselves is “will charging a convenience fee cost us business, or will it ultimately lead to a healthier bottom-line?”
Obviously one factor that always come into play in the decision is processing costs. While ACH transaction fees are far less than credit card transactions, they can still add up for an organization, especially when you factor in the IVR technology costs. Credit card transactions add an additional layer of costs to that.
As to charging convenience fees for credit card transactions, it is possible – although there are some states that have laws or regulations in this area. Credit card surcharges are illegal in California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, Maine and Texas.
In 2012, a group of merchants bright forth a suit that resulted in the ability for merchants to charge surcharges.
So long as an organization has other means of payment acceptance that does not charge a convenience fee, it’s possible. Depending on the card brands there might be some limitations. For example, Mastercard states that if charging a percentage of the transaction amount, the fee must be no greater than 4%. Check with your processor or card brands to know if your organization can utilize convenience fees when employing IVR payments.
Agile Payments has been providing IVR solutions to organizations of all sizes for 8+ years. Contact us to find out if IVR and/or convenience fees is right for your organization.