Want to use debit or credit to pay Modesto city services? There may be a fee for that

Modesto could take its first step toward charging customers who use credit and debit cards to pay for city services, including building permits, business licenses and parks and recreation classes.

The City Council will consider Tuesday approving a 2.4 percent service fee on credit and debit card transactions. There would be no fee for using these cards to pay utilities bills and parking charges, but the city is looking at imposing fees on these transactions at a later date. The service fee would take effect Sept. 1 if approved by the council.

Acting Finance Director DeAnna Christensen said the fee would cover what credit card companies charge the city to process credit and debit card payments. She said the city would not make money. But passing on these costs to its customers would save Modesto money.

A city report says imposing the 2.4 percent service fee on all transactions except utilities and parking will save the city about $139,000 annually. Modesto would realize bigger savings if it imposed fees on utilities payments. The city expected to pay $525,203 in credit and debit card fees during the budget year that ended June 30, with 68 percent of those fees — $358,365 — for utilities bills. Parking accounted for nearly $27,000 of the fees.

Christensen said the city still is researching the issues related to utilities payments. She said Modesto would charge a flat-rate convenience fee for payments made by debit or credit card. It also needs to determine under which circumstances it could impose the fee. For instance, could the city charge the fee if someone pays a utilities bill in person at City Hall? She provided a very preliminary estimate of $3 for the convenience fee.

Christensen said she expects she could have a proposal for the City Council regarding a utilities payments fee by late September. She said city staff is holding off on parking while Modesto decides whether it wants to increase how much it charges to park.

The Bee surveyed several local governments regarding their credit and debit card policies.

While Hughson and Waterford charge a fee, Riverbank does not and Oakdale imposes a 2 percent fee only on transactions of $2,000 or more. The Modesto Irrigation District does not charge.

“It’s actually a customary practice to do so in the electric utility industry,” MID spokeswoman Melissa Williams said in an email. “The cost justification for absorbing these fees is that we’re more likely to receive payments if there aren’t additional fees associated with convenient payment methods such as credit and debit cards.”

Turlock does not charge for debit and credit cards but limits their use to utilities bills and fees related to animal services, public safety and parks and recreation. Ceres has a similar policy.

The City Council meets at 5:30 p.m. in the basement chambers of Tenth Street Place, 1010 10th St.

This story was originally published July 8, 2017 at 4:30 PM with the headline "Want to use debit or credit to pay Modesto city services? There may be a fee for that."