The timeframe for West Windsor taxpayers to conveniently use their credit cards to make payments toward their tax bills or sewer rents may be coming to a close at the end of the year.
Even if the option is still available come January, it could come with a hefty price tag.
According to West Windsor officials, PNC Bank, the township’s official depository, has notified the township that beginning January 1, the bank will no longer cover the fees associated with providing the township with the ability to accept credit card payments.
The associated costs would have to be paid by the township, which officials say is not an option.
In a letter to the township, PNC Bank officials state that the move is due to changes in New Jersey’s Government Uniform Deposit Protection Act (GUDPA) that requires financial institutions in the government funds business to “significantly increase their reporting, monitoring, and collateralization of your deposits.”
The letter states that the changes will cause the bank to alter its practice of paying for third-party expenses incurred by its customers for payroll preparations, non PNC merchant services, credit card interchange fees, cash services/courier services, and computer services.
“There were apparently changes to the banking law that required more reporting and collateralization of municipal/government deposits, so the banks are indicating to use that due to these new commitments, it’s costing them more money to do business,” explained township Chief Financial Officer Joanne Louth. “So they’re re-evaluating their business, and PNC has made the decision that they’re no longer going to pay for third party charges.”
The township currently offers an online service for residents to pay their bills, which charges residents a $2 transaction fee. But Louth explains that the fee does not go to cover the costs the bank incurs for processing that charge. Rather, the fee “covers the cost of the software for the online feature,” she said.
What PNC is no longer paying for is the “interchange fee,” which could be a charge as high as 2.9 percent per transaction, depending on the type of credit card a person has. “The rewards credit cards, which bear more costs because they [the residents] get back more, versus a simple credit card — those are the costs that the bank isn’t going to pay,” said Louth.
“There are fees that are incurred, but PNC has borne the cost of them,” explained Louth. “They notified us that as of January 1, they will no longer cover those costs.”
However, if the bank is no longer going to pay for the costs, the responsibility would fall to the township, “which the town could not absorb,” said Louth.
“The amount PNC was probably paying is in excess of $300,000, so that’s definitely nothing we can assume and provide for, so we’re going to research alternatives,” said Louth.
Louth said that about 6,000 transactions are made each year through credit cards. Since payments are made quarterly, she estimated that about 1,500 residents account for those transactions.
The credit card payment option offered to residents by West Windsor without fee has not been common in other municipalities around the state. West Windsor and Princeton are among “a few towns in the state that were offering it at no cost,” Louth said.
In fact, in Plainsboro, the township has been offering a credit card payment option, but users already absorb those costs, said Plainsboro Chief Financial Officer Greg Mayers, who said that Plainsboro uses First Constitution Bank. Because those fees range somewhere between 2.5 and 3 percent, only a handful of residents use credit cards each quarter.
Because the fee is already passed on to the resident paying his or her bills, the changes in the law don’t really affect how Plainsboro does business, Mayers said. But “we do have credit cards that we take for the court, but we haven’t been notified of any changes in terms,” Mayers said.
As for West Windsor, Louth said the township just can’t switch to another bank because all of the banks are subject to the new law. “I don’t believe there is going to be another bank that comes in and provides that service,” she said.
It looks as if the only other option besides terminating the credit card option is to find a way to allow residents to absorb the fee, even though it can cost them up to 2.9 percent. For a tax bill that is about $10,000, that adds up to $290 in fees to pay by credit card.
Louth said, however, that officials haven’t calculated the actual percentage that would be tacked on to such an option. “It is a sizable fee,” she said. “We want to attempt to keep the convenience available and the option available. The cost of that would have to be absorbed by the user.”
If there are no alternatives, the township might have to do away with accepting credit cards for payments. But “if we can put something into place that allows the user to pay the fee,” instead of the township, that would be an alternative the township would consider, she said.
“If we don’t have something in place, we will not be able to accept credit cards because we cannot accept the fee,” she said. “We have no plans to add that to our operating budget.”
Through December 31, however, “we’re business as usual,” and residents can pay their bills with their credit cards — which has been running for the last four years.
Residents who pay by check, cash, or through a mortgage company will not incur a charge.
As of right now, “it does not look like there will be any entity that will be able to pay the fees other than the users,” said Louth.
Louth said officials are still researching the alternatives and hope to determine a course of action by the end of November.
