Blog Post

Verizon’s New Year’s vow: Cut back on credit cards

Stay on Top of Enterprise Technology Trends

Get updates impacting your industry from our GigaOm Research Community
Join the Community!

Like every operator looking to cut billing costs and buff its green credential, Verizon Wireless (s vz)(s vod) has spent much of the last few years encouraging its customers to move to paperless billing. But now with millions of customers checking and paying their bills online, Verizon is springing a “convenience” fee trap on its unsuspecting wireless customers on Jan. 15. On Wednesday, Droid Life reported Verizon will begin levying a $2 charge on all credit, debit and ATM card transactions processed through its website or via customer care reps over the phone. Verizon confirmed the report Thursday morning.

Credit card transactions cost Verizon money, as the banks charge a fee for every transaction they process. But $2 not only seems excessive; it runs counter to the policy that Verizon and all service providers – whether wireless, wireline, cable or utility – have implemented in recent years: cutting the enormous cost of issuing and sending paper bills and processing hand-written checks. Furthermore, the policy won’t impose the charge on all credit/debit transactions. If you sign up for auto payment, which automatically charges each month your bill to your card or deducts it directly from your bank account, you will avoid the fee.

Verizon’s goal here isn’t so much covering its credit card processing fees as it is driving customers to its more preferred payment methods. Not only is auto-pay the most direct path between Verizon and your money; it allows it to manage the timing of its payments and worry less about customers skipping their monthly bill to clear funds for groceries or a down payment on a Camaro. (s gm)  If all customers switched to auto-pay, Verizon wouldn’t collect late fees. But if a customer is regularly paying late, there’s a good chance Verizon won’t get its money at all without suspending service, so it’s better to avoid that hassle by collecting that money up front.

Verizon could find itself in customer-relations bind, both from a consumer and environmental standpoint. Verizon doesn’t charge a fee if you pay by paper check. So if the policy goes into effect, many customers may switch back to mailed bills, if only for the convenient return envelopes that come with them. Verizon also accepts electronic checks, but a lot more people have credit/debit cards than online banking services. You can also avoid the fee by paying in person at one of Verizon’s stores or kiosks.

Additional fees are never popular among consumers (Bank of America’s (s BAC) now-retracted $5 debit card fee comes to mind), but being forced to cough up $2 for the privilege of paying your carrier is really going to make people mad. And the customers Verizon is going to make angry are probably the ones it can’t afford to peeve. Postpaid smartphone subscribers are probably the biggest users of Verizon’s website payment options, and Verizon is already on rocky ground with those customers this month. This week, Verizon had its third LTE data outage for the month, calling into question its claim of running the nation’s “most reliable network.” Verizon also soon plans to launch its own NFC mobile payments service through Isis. If Verizon charges customers fees to pay their bills with credit cards, are they going to turn their credit card info over to Verizon to enable mobile payments?

Photo courtesy  of Flickr user slgckgc

14 Responses to “Verizon’s New Year’s vow: Cut back on credit cards”

  1. Todd Klein

    The coolest app that I use for mobile payments through my verizon phone is CSI globalVCard. There is no need for NFC and it’s so much safer than using my plastic card for purchases.

  2. Shankar Saikia


    Having a captive customer base with high switching costs provides Verizon a perfect opportunity to charge a levy (the $2) on these customers. The smart folks at Verizon probably realized that $2 is the best price to charge – not too high like the $5 that banks wanted to charge.

    This is RIDICULOUS and a great way to lose goodwill. Also, another piece of evidence that these moribund telcos cannot innovate and create new products and services and so the only way to raise revenue is to start levying these ridiculous fees.

    I can see the writing on the wall – these telcos stock prices are going to go down providing a perfect opportunity for them being acquired.

    Please do NOT complain if some foreign telcos launch takeover bids for our telcos (or for any other companies for that matter).

  3. The tech media is trying to whip this up into a huge story (not so much here but other sites where they’re acting like this is going to be the downfall of Verizon) but the reality is that the average Verizon customer who is paying $80-$160 for a line or two will grumble about this (if they notice it at all) and just roll with it. We’re so used to wireless service being a rip-off that another $2 isn’t going to motivate most of us to move to go through the hassle of moving to another carrier, I don’t think.

    Same thing would happen if, say, Comcast did this. We all hate these companies to begin with so it’s not like they’re going to lose good will with us. It just validates that they’re a necessary evil of modern life.

    • Kevin Fitchard

      Hi Pasmith, I agree with you for the most part. $2 isn’t much in the grand scheme of things but it’s a $2 charge must actively opt to pay every month, rather than a charge that appears on your bill that raises your ire once and then you forget about. Sure, Verizon will get a lot of customers to shift to auto-pay because of it, but customers that don’t will have a constant monthly reminder of why they’re upset with Verizon (or they’ll just pay by check). If that reminder comes in a month in which your contract expires, well…

      I agree that this won’t be the end of Verizon. The controversy will die down and people will either pay the fee of find other payment methods. But I should add that it’s a lot easier to switch wireless providers. If you’re getting 100 Mbps from Comcast and are fed up, who do you go with?

  4. If you need to talk to a human operator to pay your bill, you SHOULD be charged. TMO and AT&T imposed similar fees years ago. Online payments, however, I see no need to impose a fee.

    I’ve always declined paperless billing as I prefer to leave a paper trail of my transactions, alongside seeing in bold print every month how much I’m getting ripped off. On my bill with AT&T, I don’t get charged if I pay over the phone using their automated system.

  5. Hey Kevin –

    There are no $2 “convenience fees” assessed on credit card auto-pays. Therefore, rather than the reasons you gave for the policy change, it’s much more likely that VZW simply wants to encourage more subscribers to enroll in auto-pay so they can reduce past-due accounts and the collection costs associated with them.

  6. The first thing that came to my mind when I saw the fee is to be waived for auto-pay is that VZW is pushing more customers to not look at their bills as regularly. Whether or not this is a primary motivation, it will definitely make it easier to slip in subsequent price hikes and new fees with less resistance. Despite the convenience, I personally resist auto-pay so that I’m forced to look at my bills each month.

    • Nobody needs to abandon the convenience of auto-pay processing in order to review their bill each month before its paid. And if there’s a sudden change in you will which you disagree with you can usually get it resolved with customer service without canceling an auto-pay. Just place a reminder in you calendar each month to review you bill and leave the actual payment processing on auto-pilot.

  7. Do you need online banking services to pay VZW via electronic checks (ACH)? I don’t think you do, but I could be wrong.

    Whereas I actually get paying extra to pay your bill via phone (I’m actually surprised they weren’t, since it seems everyone else does), tacking on the $2 fee for paying via CC is asinine, especially, as mentioned above, with the push by, well, just about everybody to switch consumers to paperless billing. Granted, there are plenty of other options for paying that are not auto-pay/ACH, but there are reasons consumers may prefer to pay via CC (points, family plan where each pays their own portion, etc.).

  8. Classic profit incentive move by a wireless industry company. If VZW feels they are being nickle and dimed by the banks, they should imagine how us wireless consumers feel about being charged for every little thing.

    John B.