Consumers will soon be able to use credit cards to pay for a wide range of federal goods, services, fees and fines, thanks to government action Thursday.
The Treasury Department said it signed contracts with four major banks, including Security Pacific National Bank of Los Angeles, to process Visa and MasterCard transactions for various federal agencies.
The contracts open the door for more than 40 federal agencies--ranging from the Department of Agriculture to the Customs Service--to accept credit cards as payment for such things as passports, student loans, national park admission fees, savings bonds and medical bills at Veterans Administration hospitals.
A handful of agencies currently accept plastic, but on a piecemeal basis. The new contract will allow nearly all agencies to accept cards under a common system.
The four banks--Citibank, First National Bank of Louisville, Mellon Bank as well as Security Pacific--will process transactions and deposit funds with the government agencies. Consumers with Visa cards or MasterCards issued by any bank, not just the four processing banks, can use their cards for transactions.
"It's an extremely major development" for government and consumers, Paula Cleggett, spokeswoman for Treasury's Financial Management Service, said Thursday.
Through the use of the cards, the government expects to save between $1 million and $2 million a year by getting its money earlier, reducing paper work and avoiding bad checks, William Douglas, commissioner of the Financial Management Service, told a Washington news conference.
The government expects that consumers will spend between $3 billion and $10 billion a year through credit card transactions with federal entities, Cleggett said. That could make Uncle Sam the nation's largest credit card merchant.
"This is just the tip of the iceberg," said Alan Bredesen, sales manager for bank card operations at Security Pacific, one of the nation's largest processors of credit card transactions.
"Counties, states and cities all over the country will follow the lead of the federal government and allow people to use credit cards," Bredesen said. The bank has had discussions with county governments in California about allowing people to pay property taxes by credit card, he said. Some local governments in the East accept credit cards, but he said he was not aware of any in California.
The Internal Revenue Service has proposed that taxpayers be allowed to pay federal taxes by credit card but that would require a change in tax law, which is expected to come in 1988 or 1989.
The first agency expected to begin accepting Visa and MasterCards cards under the plan announced Thursday is the Customs Service. By Christmas, it will be ready to accept them for payment of duties at major international airports, Treasury's Cleggett said. The Customs Service already accepts the Discover credit card issued by Sears, Roebuck.
Next in line will be the Justice Department, which will accept the cards for payment of federal fines, Cleggett said.
Other federal entities accepting credit cards, Cleggett said, include the National Archives, for admission fees to presidential libraries; the U.S. Mint, for sales of special coin offerings, and the Commerce Department, for purchases of certain publications.