“Convenience” fees and cash advance APR applications could make it costly.
Non-custodial parents in Charleston County, South Carolina have joined the ranks of people that have the option of using GovPayNow.com to make child support payments online using a credit or debit card. Of course the service isn’t free.
“Users will pay fees of 3.5 percent or $3.50 minimum for online payments. The fee for payments by phone is 5 percent or $5 minimum. Cardholders can make payments on their own behalf or for friends or family.”
Two things struck us reading the statement above:
- Using a credit card to make a friend’s child support payments is something beyond Good Samaritan.
- Those fees will add up fast along with the credit card’s interest charge to make child support payments even more of a burden for the obligor.
According to the U.S. census bureau, the average child support payment is $350 per month. At $3.50 per transaction, you’re adding $42 every year onto your child support payments if you pay the average. Also consider that this doesn’t include the interest charges and fees associated with whatever credit card you use. According to CreditCards.com the average interest rate on a credit card is 13.93%. Making minimum payments, this means your child support would cost significantly more by the time it eventually gets paid off.
Child support broken down by state
We were curious if this seemingly high fee level through GovPayNow.com is better or worse than the fees applied in other counties and states. So we went state by state to see what information we could gather on child support payment fees. Interestingly, fees applied to child support payments by credit card vary widely by state. Even states that use the same processing service online can have very different fee structures. The map shown at the top has the payment methods and associated fees we could find for each state.
Fees, fees and more fees… then high interest charges
For the most part, states usually charge what are known as “convenience” fees for credit card charges. Fees usually range from 2% to 5% with minimum fee applications that range from a few dollars to up to $15. One website that’s used prominently – e-ChildsPay.com – has a $14.95 minimum charge for payments under $500. Remember, the average payment is $350 per month – at $14.95 per month that’s an additional $179.40 per year to your child support costs.
What’s more troubling is that the payment system in Oregon – MyPaymentPortal.com – has a disclaimer in their FAQ section that child support payments made through the system do not get counted as regular purchase transactions. Instead, they’re treated as cash advances. That’s troubling because cash advance APR is often higher than standard purchase APR. In fact, cash advance APR is usually over 20%.
All of this means paying by credit card may be significantly more costly than if you’d paid using other means. Wage withholding can be tough because it reduces your paychecks, but it’s usually fee-free. The same is true of automatic account withdrawals from a bank or savings account. Systems like ExpertPay.com allow you to set up recurring transfer payments from an account with either no fees or small one-time registration fees. However, in some states, even transfers are subject to additional fees. Nebraska’s state child support website even notes that any payments made using any system other than paying in person will result in a $15 convenience fee.
“Convenience fees make paying child support by credit card highly inconvenient if you’re on a tight budget,” points out Gary Herman, President of Consolidated Credit. “Children deserve to have the financial support of both parents, but at the same time non-custodial parents need to do what they can to minimize child support costs that get tacked on with fees and interest charges if the payments are made using a credit card. The added cost may mean it’s just not worth the convenience it provides.”