How to avoid paying convenience fees on utility bills

Your Business Credit columnist Elaine Pofeldt
Elaine Pofeldt is a journalist whose articles on entrepreneurship and careers have appeared in Fortune, Working Mother, Money and many other publications. She is a former senior editor at Fortune Small Business magazine and an entrepreneur herself, as co-founder of, a website for independent professionals. She writes "Your Business Credit," a weekly column about small business and credit, for

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Question Dear Your Business Credit,
How does PG&E get away with charging a $1.25 convenience fee per transaction for using a credit card to make payment? I wanted to set up automatic bill pay via one of my cards, but it would cost me $15/year. All my other bills are autopay to one card or another and no one else charges for the use. Thanks for listening. Any advice? – Sherry

Answer Dear Sherry,
I’m getting more letters from readers like you who are fed up with convenience fees. For the moment, unfortunately, it looks like you will have to live with them.

As I mentioned in an earlier column, the contracts merchants have with credit card companies largely govern their rights to add surcharges to credit card transactions. These contracts also cover their rights to add convenience fees. In the utilities and insurance industries, convenience fees are common when consumers opt for a payment method that is not a typical one for the merchant or when customers choose an alternative payment channel.

Given the number of customers a utility serves, it could potentially lose a lot of money by absorbing all of the credit card fees for each transaction. Merchants usually pay 2 to 3 percent in fees when they swipe a consumer’s card, or thereabouts. Very likely, the utility’s financial team did the math and realized it would be in much better shape financially by passing those fees along to customers like you – even if those customers are not happy about it.

My suggestion: If you want automated payments but don’t want to pay fees, ask PG&E if there is a way to have your payment automatically deducted from a bank account, so you can bypass the fees. Or you can forgo the convenience and write a check every month. At the current price of 47 cents per first-class stamp, you will still have to pay $5.64 in postage stamps over 12 months, but there should be some small savings if you have a bank account offering free checking. Or, see if you can pay the bills directly from your online banking portal, forgoing the inconvenience of having to mail it yourself and paying postage fees. If you live near a location where you can easily drop off a utility payment, you can also save on postage that way.

I should note that convenience fees are not the same as surcharges. With a surcharge, a gas station or merchant that normally accepts credit cards adds an extra percentage to the purchase price for customers who use them. Under a settlement that took effect in January 2013, merchants can add surcharges to Visa and MasterCard purchases equal to what they pay to accept the card, up to 4 percent. American Express has allowed merchants to pass along a surcharge to customers under a separate court settlement.

Some states have laws banning or limiting surcharges. California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, Texas and Utah have laws limiting surcharges. However, in California a federal court enjoined the state from enforcing its statute in March 2015, because a court determined it was unconstitutional.

I’d encourage you to set up a search engine alert to stay on top of news about convenience fees and surcharges. The Supreme Court just announced it will hear a dispute over state laws that ban merchants from imposing fees on customers who use credit cards. What the Supreme Court decides could have big implications for merchants who process credit cards.

See related: Should we charge our customers to use credit cards?  When merchants tack on card processing fees

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Updated: 02-22-2019