The fee does not apply to either ACH or AutoPay transactions. This leaves credit card payment as the only mechanism which does incur the fee. Verizon can't come out and say that the fee is because you're using a credit card, because the terms between credit card processors (e.g. MasterCard, VISA) and merchants (in this case, Verizon) specifically forbid altering the price if a credit card is used. When you pay a merchant with a credit card, the merchant only gets 97-99% of the price you pay with the card. 1-3% goes to the credit card company. Verizon can accept payment in any of three ways, but one of them costs Verizon more than the other two ways, and they consequently charge a fee. It's not exactly in-line with their costs, but considering what a monthly phone bill for a smart phone costs, it's not grossly far off, either.