From Convenience to Service Fees: The Utility CFO’s Playbook for Managing Payment Costs

Executive Summary

Utility finance leaders are feeling the pinch: you need to cut costs, work smarter, and keep your customers on your side—all at once. In 2025, payment processing fees, and especially the rising cost of accepting credit cards, have stepped into the spotlight and demand serious attention. This guide lays out what’s changing in utility payment processing, reveals how premium rewards cards are driving up expenses, and explains why Visa’s Service Fee Program offers a better path than old-school convenience fees. If protecting margins and public trust matters to you, the next few sections will be essential reading.

Current Utility Budget Landscape (2024–2025)

The pressure on utility finances keeps building. Electricity prices have jumped—often twice as fast as inflation—making it tougher for families and businesses to keep up with monthly bills. Utilities, meanwhile, are investing more in infrastructure upgrades, smarter tech, and maintaining aging systems. At the same time, the number of customers struggling with affordability keeps rising, and average unpaid balances have now crossed $789. The upshot? Utility finance teams are facing heightened scrutiny over every line item, and there’s growing urgency for solutions that keep costs fair, visible, and easier for everyone to manage.

The Premium Rewards Card Challenge

Rising Prevalence of High-Cost Cards

Premium rewards and business credit cards are showing up more and more in utility payments—driving up costs every time someone pays a bill online with one of these high-fee cards. While traditional convenience fees help a little on smaller bills, they can leave utilities absorbing some steep losses when larger payments roll in. That’s because a flat fee just doesn’t keep up with the actual expense when premium cards are in play.

Service fees are a game-changer here. Utilities can use a percentage-based fee that rises along with the bill amount and the type of card, making sure they truly cover their costs as more customers choose rewards-packed cards for bigger payments. With usage growing fast, it’s helpful to look at just how dominant premium and rewards cards have become when it comes to utility bill payments—and why rethinking card fee strategies matters more than ever.

Key Statistics on Premium Rewards Card Usage

• Credit cards now account for approximately 45–65% of all U.S. online purchase transactions, and that percentage keeps climbing.​

• About 82% of U.S. credit cardholders have at least one rewards credit card, with rewards cards dominating online spending.​

• Industry estimates show more than 60% of online credit card transaction volume now runs on rewards-based cards, most of which are premium cards with higher interchange fees.​

• In utility and business payments, the use of these high-cost “reward optimization” cards is even higher—driven by affluent and business users making large, recurring payments.

• Online transactions make up 69% of all credit card purchases, the majority using rewards cards.​

Visa’s 2025 Interchange Rates for Premium Rewards Cards

For card-not-present (CNP) transactions—which apply to online utility payments—Visa’s current interchange rates present significant cost challenges:

Direct Profitability Impact on Utilities

Premium rewards and business cards are driving up the cost of accepting utility payments, often with fees that are several times higher than debit or standard credit cards. If utilities can’t pass these costs on, every premium card payment squeezes their margins even tighter. With business and government customers most likely to use these high-cost cards, the impact is growing—and smart fee strategies are more important than ever. Let’s take a closer look at just how much premium card usage is affecting utilities today, and what can be done about it.

Strategic Fee Management Solutions

Visa Service Fee Program: Built for Utilities

Visa’s Service Fee Program is now more accessible and relevant for utilities than ever before. Utilities can easily enroll and use this program to transparently pass on service fees to customers paying with credit and debit cards. Visa provides clear rules and rate structures designed to help utilities cover their card processing costs without running afoul of network or regulatory requirements. The result? Utilities can better manage expenses, customers know exactly what they’re paying for, and everyone benefits from a straightforward, compliant approach to handling payment fees.

Key Advantages of Visa’s Service Fee Program

1. Eligibility and Structure

• Specifically designed for government, education, and eligible utility payments

• Utilities operating under certain merchant category codes (MCCs) can legally and compliantly assess a service fee on Visa card payments

• Can be processed both in card-present and card-not-present channels​

2. Flexible Application

• Service fees may be either flat or variable

• Permitted for both consumer credit and debit, as well as commercial cards

• Provides operational flexibility not available under standard convenience fee programs​

3. Separate Transaction Processing

• The service fee is processed as a separate transaction

• Enhances transparency and improves reporting

• Makes it easier for utilities and their providers to account for collected fees directly​

4. Compliance and Disclosure

• Clear, card-brand-approved disclosure rules

• Supports strict compliance and lowers the risk of penalty

• Customers see the fee appears as “service fee” and are notified prior to payment​

5. Lower Risk, Greater Predictability

• Designed to meet Visa network requirements

• Minimizes risk of inadvertently violating network or state law policies

• Simplifies operations for utilities​

Service Fees vs. Convenience Fees: Critical Differences

Understanding the distinction between service fees and convenience fees is essential for utility finance leaders making strategic payment processing decisions.

Limitations of Convenience Fees

• Restricted channels: Visa and other networks require convenience fees only be charged via “alternative” payment channels—often meaning utilities can only use them for web, phone, or non-standard channels​

• Flat fee requirement: The fee must be a fixed (not percentage-based) amount, limiting flexibility​

• Merchant category limits: Utilities participating in the Visa Utility Rate Program cannot use convenience fees. Government and education payments can use service fees, but other segments may not qualify​

• Compliance complexity: If rules are misunderstood, a convenience fee could be misapplied, exposing utilities to penalties. There’s more operational complexity in tracking channels and fee disclosures to maintain compliance​

Why Utilities Prefer Service Fees

Finance and accounting leaders increasingly favor service fees because they:

• Allow broader and clearer application across channels and card types, including regulated debit and premium business cards​

• Provide greater legal and card-network compliance with less “gray area” than convenience fees, as service fees are purpose-built for biller categories​

• Create a simplified customer experience with fees clearly presented, processed separately, and disclosed in advance​

• Offer flexibility to recover processing costs more effectively from high-cost cards and transaction types​

• Enable streamlined reconciliation and reporting to support regulatory audit and customer transparency demands​

In summary, Visa’s Service Fee Program provides utilities with a purpose-built, compliant, and transparent mechanism to offset payment processing costs, especially for high-cost premium rewards transactions—representing a strategic improvement over convenience fees.​

IntelliPay’s Service Fee Expertise

At IntelliPay, we understand the complex payment processing challenges utility finance leaders face. With extensive experience implementing Visa’s Service Fee Program for government and utility clients, we help organizations:

• Navigate compliance requirements across card networks and state regulations

• Implement transparent fee structures that protect margins while maintaining customer trust

• Optimize payment acceptance across all channels (online, phone, in-person)

• Reduce processing costs through strategic payment method promotion and data optimization

• Provide detailed reporting for financial reconciliation and regulatory audits

Our service fee solutions are designed specifically for the utility sector, addressing the unique challenges of high transaction volumes, diverse payment types, and strict regulatory oversight.

Conclusion and Recommendations for Finance Leaders

The 2025 utility landscape is marked by historic investment in infrastructure, sharply growing O&M outlays, and intensifying concerns about customer affordability—including payment processing fees. Utilities, finance officials, and regulators are being forced to prioritize every budget line, and payment processing expenditures, while typically dwarfed by capital spending, are now a notable focus area for cost-cutting, transparency, and public trust.​

The migration to premium rewards cards among U.S. consumers and businesses is materially raising credit card acceptance costs for utilities. Unless proactive pricing, surcharging, or fee offset strategies are implemented—such as Visa’s Service Fee Program—utilities risk erosion of profit margins as these cards dominate payment channels.​

Action Items for Utility Finance Leaders

1. Assess current payment processing costs and analyze the mix of payment types (premium rewards, standard credit, debit, ACH)

2. Evaluate Visa Service Fee Program eligibility and compare benefits versus current convenience fee structures

3. Implement transparent fee policies that comply with network rules and state regulations while protecting margins

4. Promote lower-cost payment methods to customers through education and incentives

5. Conduct regular audits of processor statements and fee structures

6. Leverage technology and automation to reduce operational costs and improve reconciliation

7. Partner with experienced payment processors who understand utility-specific compliance and regulatory requirements

By taking a strategic, data-driven approach to payment processing fee management, utility finance leaders can protect margins, maintain regulatory compliance, and support customer affordability—even as premium rewards card usage continues to rise.

FAQs

Q: What is Visa’s Service Fee Program for utilities?
A: It’s a program that lets utilities recover credit and debit card processing costs by adding a transparent service fee to online payments, following Visa’s requirements.

Q: Are service fees allowed everywhere?
A: Most states allow utilities to use service fees if they are fully disclosed, fair, and paired with a free payment method—though local rules may set additional limits.

Q: What’s the difference between a service fee and a surcharge?
A: Service fees for utilities form part of card network programs and can cover both credit and debit cards. Surcharges specifically target credit card use and are more often restricted by state law.

Q: Why are card processing fees for utilities rising?
A: Increased use of premium rewards and business cards—especially for large payments—results in higher merchant fees for utilities.

Q: Can utilities charge a percentage fee?
A: Yes, utilities can use either flat or percentage-based service fees, depending on what’s best for their payment mix and compliance needs.

For more information about implementing a Service Fee Program and optimizing your utility’s payment processing strategy, visit IntelliPay.com or contact our utility payment specialists.

About This Guide: This comprehensive resource was developed for utility finance directors, CFOs, controllers, and accounting leaders managing payment processing operations and costs. All data reflects 2024–2025 industry research and current card network programs. This guide is for informational purposes only and does not constitute legal, financial, or regulatory advice. While every effort has been made to ensure the accuracy of the information provided, utility payment regulations, service fee policies, and card network rules may change and often vary by state or locality. Readers should consult with qualified legal, compliance, or regulatory professionals before making decisions or implementing new fees. The authors and publishers of this article accept no liability for actions taken based on this content.