Pay your rates by credit card: you pay 2% extra. Pay by debit card: LPS pay 29p.

Northern Ireland ratepayers choosing to pay their rates bills by credit card contributed around £32,000 to Santander last year.

How do you pay your rates? Pay the whole year off up front and get the small discount? Pay monthly? Direct debit? Post Office? Or maybe you put on your credit card? Increasingly, government bodies are offering online card payment as an option for tax collection and bill payment. But just like booking a flight, there’s a surcharge. You pay dearly for convenience.

In the case of Land and Property Services (LPS), there’s a 2% surcharge for credit card payments, an innovation they introduced in 2010/11. (Debit card payments don’t attract a customer surcharge, though LPS pay just under 30p per transaction.)

As series of written questions have been tabled for the Minister of Finance and Personnel in the Assembly by Conall McDevitt to look at these charges and see who benefits. The first question discovered that LPS staff costs for processing a credit or debit card payment is estimated at £1.30. However, “there is no profit made by Land & Property Services from the [2% surcharge]”.

A follow-up question asked “to where the revenue generated from the two percent transaction fee on the payment of rates bills goes, given that the processing costs to the Land and Property Services (LPS) is only £1.30 and he has stated that the LPS does not make a profit”. Simple …

The 2% transaction fee is paid directly to the LPS payment service provider at the point of payment. The 2% fee is not paid to LPS.

And the service provider?

Santander is the organisation that provides internet and telephone payment services to LPS.

• 26,663 debit card transactions were processed by LPS in the year 2011/12 (up from 4,958 the year before). LPS paid £7,837.85 to Santander. That’s 29.4p per transaction.
• 2,498 credit card transactions (around £1.6m) were processed by LPS in the year 2011/12. LPS paid nothing. However, the rate payers in question paid approximately £32,000 in fees directly to Santander. That’s an average of £12.81 per transaction.

There’s no scandal in any of this. It’s quite a transparent system. By using Santander’s Billpay service, the credit card fee goes nowhere near DFP’s coffers. Indeed the NI Direct Pay your rates online webpage clearly states:

When you make a payment, if you choose to pay by credit card, you will be asked to confirm that you agree to the credit card handling fee. You will also be advised how much the handling fee is.

However, this series of written answers in the Assembly does raise other questions:

• Why are NI ratepayers being surcharged 2% if they pay by credit card when paying your tax online to HM Revenue and Customers via Billpay only attracts a 1.4% fee? Should NI Executive departments – and indeed those across the UK – not be able to collectively negotiate a consistent level of surcharge?
• Paying your rates at the Post Office or Payzone outlet – a very convenient method for many ratepayers – doesn’t seem to attract a customer surcharge. However, there are transaction fees for these services being picked up by LPS. How many people are paying by these methods, and what is the cost to LPS? Why the policy discrepancy in swallowing some costs but not others?
• Finally, there a question to service providers. Are credit card payments really so much more expensive to process than debit card payments, justifying the enormous increase in fees earned by the service provider? The difference between 29.4p and £12.81 either reflects the additional risk of credit card payments over debit cards in not being immediately backed off by bank account funds, or includes an enormous profit margin … or both.

The good news is that at least LPS aren’t sticking the arm in with £9 administration fees like many airlines continue to apply (often amounting to a 5–10% surcharge on the total flight value).