Treasury and Investment Management

Fees for Use of Credit Cards in Payment of State Local Government Charges

The use of credit cards is a convenient and increasingly popular method of payment of state and local government taxes, fines and other charges. Acceptance of credit card payments is one of several payment options offered by many state and local governments as a service to citizens and as a way to accelerate collection of amounts owed to those governments.

Credit card companies do not allow governments and businesses to pass on the usage fees imposed by credit card vendors to citizens and customers utilizing this payment option. State and local governments, unlike businesses, however, collect taxes, fines, forfeitures and other involuntary assessments and are unable to adjust their "pricing" to cover the costs of collections. State and local governments are not permitted to deduct such usage fees from the amount of taxes owed. Accordingly, they should not be required to absorb usage fees in their entirety for involuntary assessments, and thereby force all taxpayers to bear the cost of the use of credit cards.

The Government Finance Officers Association (GFOA) strongly encourages efforts to have credit card vendors either voluntarily or under appropriate legislation modify their present prohibitions on state and local governments from collecting usage fees for involuntary assessments paid by credit cards.

  • Publication date: May 1993