Creating A Better Company

3 Advantages Of A Utility Merchant Account

These days, most American households take care of their utility bills online using their debit and credit cards. For a municipality or utility company that still relies on checks and cash payments, this could be an easily missed opportunity to not only reduce expenses and increase revenue but also to make the payment process more accessible and convenient for customers.

Ordinary merchant accounts make it possible to accept debit and credit cards as well as other forms of online payment. If your business provides electric, gas, sewer and/or sanitation services, opening a specialized utility merchant account provides a number of unique advantages compared to a standard merchant account. The following examines three of these advantages in-depth.

Reduced Interchange Rates

One major advantage of having a utility merchant account is the ability to benefit from significantly reduced interchange rates. In 2005, Visa introduced a flat interchange rate for debit and credit transactions in the utility sector, with MasterCard following suit a year later. Any business that processes transactions under Merchant Category Code (MCC) 4900 can take advantage of the reduced rates.  

Instead of being charged a percentage of the transaction plus a nominal per-transaction fee, merchants only pay a flat fee for each transaction. For instance, MasterCard only charges a flat rate of $0.65 for each utility services payment, compared to 2.95 percent of the transaction amount plus a flat rate of $0.10 per transaction.

The end result is an interchange rate that is significantly cheaper than the standard rates used for other non-utility transactions. This makes payment processing less expensive for utility companies, municipalities and other merchants delivering utility services for their customers. You can also apply a surcharge fee to credit card transactions in order to recoup the full cost of your utility services.

One reason utility companies, municipalities and merchants offering utility services can benefit from such low rates is due largely to the relatively low liability their payments represent. Payment processors generally consider utility companies and municipalities to be low-risk merchants due to their relatively reliable and predictable payments.

Multiple Payment Options

With utility merchant accounts, you're not limited to credit and debit cards as available payment methods. Despite debit and credit cards quickly becoming the dominant form of payment for many utility customers, others may prefer to use alternative payment methods for convenience or added peace of mind. Fortunately, you can set up your utility merchant account to accommodate these payment methods.

For example, loyal customers who are more comfortable paying with checks can have their checks processed online via eCheck. You can also accept payments from customers using prepaid debit cards and direct payments from online payment venues.

Having a broad range of fast and secure payment options available ensures timely payments from customers using alternative forms of payment. With customers able to choose the payment option they prefer, they'll find it easier and more convenient to take care of outstanding account balances and purchase other products and services.

Reduced Operating Expenses

Many municipalities and utility companies find their bottom lines eroded due to increased processing costs. Traditional payment methods with slow processing times can also add considerable time and expense to the payment process. There's also the time and expense involved in maintaining and tracking delinquent accounts.

A utility merchant account can offer utility companies a more reliable and efficient way of processing various payments. Instead of relying on traditional check processing methods, utility companies can opt for faster and safer electronic check conversion and check verification methods. Reduced interchange rates also mean reduced payment processing expenses, adding more profit to your company's bottom line.