Recently I set out to do a little research into convenience fees for credit cards and other forms of electronic payments in Higher Ed. I wanted to examine the opportunity for CIO’s to adopt alternative payment systems or alternate currencies to lower the institutional costs through the efficiencies of greater use of electronic payments while avoiding the traditional processing fees that often eat up the savings on larger dollar purchases.
Definition of Convenience Fee
The definition of convenience fee varies slightly from one credit card company to the next. The definition of convenience fee in general refers to an additional cost over and above the transaction amount charged for the convenience, or privledge, of being able to use an alternate payment option. A convenience fee is considered to be a surcharge, and not allowed in most cases, if it penalizes one form of payment over another.
Cost of College
Credit card debt and how to get rid of credit card debt is rarely mentioned in conversations about the cost of college other than to note that student loans are projected to exceed $1 Trillion surpassing credit card debt and auto loans. The cost of college story would be far worse if it accounted for all the college expenses including tuition paid by credit card. Based on an estimate from this research it appears UW System students may have paid over $10 Million using credit cards in 2011. It might be smart for these students to at least do some research into credit card debt consolidation loan to improve the manageability of their loans.
UW System Policy on Convenience Fees
To understand the current practices on convenience fees more broadly I reached out to the University of Wisconsin System and its 13 universities and 14 colleges to determine if there are any policies governing when or if a university can absorb credit card or PayPal processing fees or if they can or must be passed on as a convenience fee.
Although every university published information on the allowable payment methods and any convenience fees, they did not have a policy governing allowable payment methods or absorption of processing fees versus charging convenience fees.
Two universities do refer to the UW System Policy on convenience fees which primarily relates to tuition and fees but does encourage ACH and eCheck over credit cards.
Cost of Convenience Fees
I also asked the UW System institutions what their convenience fees totals were in 2011.
Only 9 of the 15 UW System entities were able to determine their convenience fee totals for 2011. This was due in part to fees being charged directly to students by the processor instead of flowing through the university. Most of the universities have a convenience fee total in the $10,000 to $22,000 range.
Estimating this out, there may be roughly $250,000 for the UW System in any given year being passed on to the student as convenience fees..
Convenience Fees Vary
There are several differences in the payment practices in the UW System which area allowed under the UW System Policy including:
- Two universities do not charge a convenience fee choosing to absorb approximately $22,000 to $25,000 in processing fees into their budgets.
- Convenience fee rates can vary for tuition, housing or food including one school that charges fees on housing and meals but not tuition.
- The convenience fee rates vary from 2.5%, 2.7%, or 2.75% of the transaction amount with two universities using a fixed fee in 2011 of $15 and $25.
- Most limit credit card payments to online transactions (the convenience) and require all walk-up payments to be cash or check.
- Some allow telephone payments (another convenience) by credit card and charge fees.
- None of the universities accepted PayPal for tuition and fees.
- Two universities do not accept Visa credit cards or debit cards because of the Visa convenience fee policy.
- Some charged a convenience fee for theater ticket sales but not for athletic tickets.
- It does not appear any universities or their affiliates charge convenience fees on sales or donations through their bookstores, foundations, athletic boosters, or food services.
Wisconsin Technical College System
For the sake of comparison the 16 colleges in the Wisconsin Technical College System web sites were checked for practices on charging convenience fees finding:
- Only 1 of the16 technical colleges charged credit card convenience fees at 2.75%.
- Payment plans seemed to be given much more emphasis over other forms of payment with one college not publishing any other payment options including cash.
- eCheck and ACH payment options were promoted over credit card by one college that even noted the institutional savings to encourage students to not use credit cards.
- None of the colleges accept PayPal for tuition and fees but some do for donations.
The differences between the Wisconsin Technical College System colleges and the University of Wisconsin System are most likely due to the differences in governance resulting in the UW System universities having to follow the State’s Convenience Fees Policy requiring fees to be minimized.
Editorial Comment: Since the ~50% of a technical college’s funding comes from district property taxes, I will admit to being a little unsettled that property taxes are subsidizing students using credit cards.
Well I don’t know if this was useful or not. My hope is that it might inspire CIO’s to look into their own policies on convenience fees and supported payment options. I hope CIO’s cost out each payment option so they will know if the labor savings of electronic payments are surpassed by the processing fees.
Mostly, I wanted to share this information as a foundation for some recent news that might change things entirely. So stayed tuned.