Making a credit card transaction isn’t free. Credit card giants such as Visa and Mastercard charge fees for each swipe or tap. More and more often, businesses are making customers pay the fee themselves.
What used to be limited to convenience stores has now migrated to the world of automated bill payments online. That puts customers in a quandary.
Money expert Clark Howard is on record as saying you should never pay for things with a debit card because of its lack of consumer protections. Credit cards also typically allow for rewards and cash back.
So what do you do if a company starts to penalize you for making automatic payments via credit card? That’s what a listener of the Clark Howard Podcast recently asked.
Companies Are Penalizing Customers for Automated Credit Card Payments. What Should You Do?
My insurance company is taking away the option to pay my premium via credit card in equal monthly payments. What should I do?
That’s what a listener asked on the July 26 podcast episode.
Asked Susan in California: “My car insurance company is changing its policy for payments. I automatically charge my credit card each month. I divide my payments for my six-month premium equally and pay a small fee to pay it out over time rather than all at once.
Now the company says that if I continue to use my credit card for autopay I will have to pay 50% of the 6-month premium up front. They’ll spread the rest of my payment over the other five months.
My only other option is to do automatic withdrawals from my bank account. What should I do? I would like to keep the even payments each month as that is what my budget is based on, but they are not allowing that anymore unless they have access to withdraw from my bank account.”
Unfortunately, this is the new world order. And as long as Visa and Mastercard hold the power, expect it to continue.
“We’re going to see more and more of this,” Clark says. He also referenced that T-Mobile recently changed its autopay rules not just for new customers going forward, but for existing custmers as well in what is effectively a price hike.
“People are so upset about T-Moble. Changing it for existing customers? That’s terrible customer no-service. Your auto insurer changing it [for you as] an existing customer is just dumb.”
Clark’s insurer recently instituted a new policy requiring the whole year upfront if he wants to continue paying via credit card. So Susan’s insurer is giving her a better deal than what Clark gets even with the tougher new policy.
Expect this to become “a common and routine thing” going forward.
“Why are they all doing it? Because we pay by far the highest credit card merchant fees in the whole world. There’s a corrupt alliance that leads to these much higher fees. I call it the Visa-Mastercard cartel,” Clark says.
“And so more and more American businesses are saying, well, we’re either not going to take the credit card or you’re gonna pay more to use the credit card or we’re going to make it difficult to do so.”
Automated credit card payments offer consumer protection and potentially cash back. But don’t expect the companies processing your monthly bills to make it easy on you to continue paying that way.
Companies of all stripes are doing everything they can to get you to pay another way.
You often don’t have much choice. Either you accept the stipulations that come with automated credit card payments. Or you risk paying via a debit card, preferably attached to an account you fund only enough to cover your recurring bill.