If you are like many dedicated credit card users, then you probably dislike having to come up with cash or a check to pay your state fees for your driver's license and vehicle registration. Not only are these methods of payment less secure and convenient than using a credit card, but drivers also feel like they are missing out on the valuable rewards that they earn from their other purchases.
More States Are Looking to Credit Cards to Streamline Payments
Thankfully, more states are starting to realize that there are many advantages to accepting credit cards from their residents. In June, the Ohio Bureau of Motor Vehicles became the latest state to accept credit cards for license and registration fees, albeit with a surcharge of $1.25 or 1.95 percent, whichever is greater. A state can add these surcharges, even when it outlaws merchants from charging extra for credit card transactions, as government taxes and fees charges from regulated utilities are typically exempted from laws prohibiting surcharges. The change came after the Ohio legislature passed a bill requiring deputy registrars to accept both credit and debit card payments, while charging a fee to offset the costs.
Ohio joins states like Colorado that also accept credit cards for a variety of government taxes and fees, including property taxes. In fact, the City and County of Denver has gone so far as to eliminate credit card processing fees for driver's licenses, vehicle registration and even property taxes. Denver's move to drop it's previous 2.7% credit card processing fee is designed to encourage residents to pay their taxes and fees online, which saves the state the cost of staffing offices that handle cash and checks. Other states that accept credit cards for license and registration fees include New York and Connecticut, with Oregon promising full acceptance by the end of 2016.
Reasons that States Should Accept Credit Cards
It would be easy to look at this issue and conclude that states have no reason to incur the cost of merchant processing fees to accept credit cards. Unlike a competitive retail environment, residents have no alternative that competes with their state's department of motor vehicles. Yet a closer look reveals that governments that choose to accept credit cards can enjoy most of the same benefits that other merchants do. As Colorado discovered, accepting credit cards is crucial part of any effort to reduce costs by shifting transactions online. In addition, governments are not immune from many of the problems inherent to other forms of payment like cash and checks. Checks can be used fraudulently or returned for insufficient funds, while cash is vulnerable to theft from both employees and outside criminals. Finally, credit cards can also help residents to finance payment of these taxes and fees when they don't currently have all the money they need in their bank accounts, which reduces delinquency and increases revenue.
By being one of the last places to accept credit cards, some states have shown that they are willing to inconvenience their residents in an attempt to maximize revenue. But when legislators and other administrators look at the big picture, they may find that accepting credit cards is the best way to serve its citizens.