Paying college tuition with credit card gets costlier

— -- Across the nation, a growing number of universities are making it harder — and costlier — for students to use credit cards.

Starting Wednesday, students at the University of Southern Maine who pay tuition using plastic will face a 2.75% processing fee. Other schools that have adopted, or are adopting, similar policies include George Mason University, Northwestern University, Wichita State and the University of Virginia.

The movement comes as colleges face budget shortfalls and look to trim costs wherever they can. When students use a credit card, institutions have to pay an average of 2% to process the transaction, according to Nilson Report, a payment systems newsletter.

Traditionally, colleges have borne these costs themselves. But they're increasingly rethinking these policies — and passing costs along to students — amid the difficult economy.

In 2007, 26% of colleges charged a credit card payment fee, either directly or through a third party, up from 14% in 2003, according to surveys conducted by the National Association of College and University Business Officers.

Other industries, such as retailers and airlines, are also grappling with the impact of credit card processing fees.

At George Mason University, controller Elizabeth Brock says that 50% of students typically pay their tuition via credit card. Brock believes the 2.75% fee levied on credit card transactions will cause many students to switch to other forms of payment.

"A high percentage of our students and parents who used a credit card (did so) because there was no incentive not to," says Brock, who estimates the school will save $1.5 million a year from its new policy. Students can still pay their tuition by credit card — through TouchNet, a third-party provider — she adds, but, "It's not going to be cheap."

TouchNet accepts MasterCard, American Express and Discover, but not Visa, President Dan Toughey says, because of Visa rules that prevent it from passing the credit card processing fee on to consumers. Visa spokeswoman Randa Ghnaim says it doesn't allow merchants to charge consumers processing fees because they're "unfair."