Whenever a purchase is made with a debit card, transaction fees are typically about 50 cents. But, if that purchase is for a child’s lunch at school, the fee can jump to over $2.
This disparity occurs when a market is dominated by a small handful of players. Although more than 20 companies offer lunch payment services to school districts nationwide, the majority of enrolled students are served by just three market leaders—MySchoolBucks, SchoolCafé, and LINQ Connect—who control two-thirds of the school lunch payments market, according to a new report from the Consumer Financial Protection Bureau.
The CFPB analyzed the lunch programs at the 300 largest public school districts in America and found that payment processors charge average transaction fees of $2.37, or 4.4% of the total transaction, each time money is added to a payment account. Families making online payments every other week can end up spending as much as $42 in transaction fees over the course of a school year.
Families paying full price for lunch spend 8 cents in fees for every $1, while those paying a reduced price for lunch can incur as much as 60 cents in fees for every $1 spent.
And most families have no choice but to pay thoee fees. Contracts are determined at a school district level, meaning parents are stuck with whichever company won the bid to handle funds for online student lunch accounts.
The Cashless Lunchroom
This is all unfolding as school districts increasingly shift to cashless operations. The CFPB found that 87% of the sampled school districts have contracted with payment processors to enable electronic payments for expenses like school lunch costs.
The payment platforms are often just one element of a larger contract for school nutrition or information management services. This makes the fees less noticeable to the school districts and leaves many schools less inclined to negotiate them.
“As the growing use of digital payment options expands to our schools, we must take care to meet schools and families where they are—examining benefits as well as pitfalls, listening to community concerns, and implementing guardrails where necessary,” said U.S. Secretary of Education Miguel Cardona in a statement accompanying the findings. “Above all, actions around digital payment options must keep students at the center, recognizing that no student can learn if they are hungry and lack the tools they need.”
