December 3, 2023

Bucks: Bill Paying Made Easier, but for a Fee

Courtesy ChargeSmart

Lots of people like to pay big bills with their credit or debit cards so they can rack up reward points or manage their cash flow when money is tight. But it’s sometimes hard to do that with certain big bills, like those from your mortgage servicer or your electricity provider. Many of those companies still refuse to accept plastic — or accept only certain brands.

That’s where the online payment provider ChargeSmart fills a niche. The company acts as a middleman, accepting payment from your credit or debit card and then arranging a funds transfer to pay your bill. But it charges a fee of as much as $9.95, in the case of a car payment.

The rationale for doing this puzzled me. Why would you pay a fee to pay a bill, when you could just write a check — or, even easier, pay it online from your checking account?

Tim Brinkman, ChargeSmart’s chief executive, said in a telephone interview that most of its 300,000 or so users do, in fact, have checking accounts. Most use debit cards, which are tied to checking accounts. But only about 15 percent of checking account holders, he said, actually set up electronic bill payments. They may see it as too time-consuming to enter the necessary information, or they may balk at the so-called negative float that can occur when funds are quickly withdrawn to pay a bill, but the recipient doesn’t actually get the funds for as much as five days.

Or, if they’re using a credit card, they gain time to pay a big bill — useful for people who get income in spurts, like salespeople or real estate agents who work on commission, or for someone on a tight budget who gets hit with, say, a big car repair bill and is juggling payments. They can pay their mortgage on time and avoid hurting their credit score, he said, but know they won’t have to cover it with cash until the next billing cycle. “It gives some breathing room,” he said.

Mainly, though, Mr. Brinkman said, people use ChargeSmart because of its “ease of use.” People can find their utility company, mortgage servicer or student loan company from a pull-down menu and make the payment quickly, without having to register on the Web site. Payments post within two to three days. “They like the fact that it shows up on their statement, and there are rewards associated with it,” he said. Some credit cards, he noted, offer cash back, which can reduce the impact of the fee.

The fee can vary, depending on the size of the payment and the company being paid. In some cases, it’s a flat fee, while in others, it’s a percentage of the bill, or some combination of the two. (The Web site offers payments to hundreds of utilities across the country. In a test run, a $200 payment to Alaska Electric Light and Power cost $9.53, while the same payment to Southern California Gas Company cost $4.95, according to the Web site). Even if you’re getting 2 percent back on your credit card ($4, on a $200 charge), you’re still paying something for a service that you could get free — or, at least for the cost of a stamp. “We don’t say it’s the right option for everyone all the time,” Mr. Brinkman said. “But it’s a great option for people to have.”

In some cases, depending on the card used, ChargeSmart doesn’t make money on the transaction, because of the high “interchange” fee it has to pay, Mr. Brinkman said. But ChargeSmart may benefit from a proposed federal cap on such fees, which merchants pay banks to process credit and debit card purchases. (Or, Mr. Brinkman said, maybe not. Banks may de-emphasize the use of the cards in response to the proposed cap or tighten standards for getting the cards. “There’s always unintended consequences,” he said.)

Meantime, he said, the site is offering incentives to continue to attract new users. This summer, for instance, Discover will pay all ChargeSmart user fees for its cardholders for a fixed period of time, as part of a promotion.

Have you used ChargeSmart? Do you think the convenience is worth the fee?

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