When any credit card user swipes their card to pay for fuel, there is a transaction charge that accrues on the swiping of the card. This transaction charge is levied whenever the credit card is swiped either through online or offline mode. This transaction charge is usually about 1% of the amount that has been paid. This is taken by the merchant where the card is swiped or used and is called credit card fuel surcharge.
What usually happens is that the traders let the consumers use their credit cards on the plan that the credit card issuing organization motivates their customers to make purchases at the trader’s. Therefore, to raise their sale, the trader has to pay a small fee which comes up to about 1 to 2% of any purchase that any credit card user makes at their business. The trader receives the amount of the transaction made at the petrol or fuel station from the credit card issuing corporation. This amount, however, is transferred after the deduction of the 1 to 2% charge by the card issuer.
What is Credit Card Fuel Surcharge?
Although the transaction fee is accrued to the trader, the fuel industry does not work on that principle exactly. This is proved by the fact that in India, the oil corporations are not accountable for the payment of the fuel surcharge. It is the customers who are swiping their cards at the fuel stations who pay the fuel surcharge to their banks. It is charged as a credit card fuel surcharge or a convenience fee from them. There are however, some credit card issuers who provide credit cards with the option of a fuel surcharge waiver. This waiver on credit card fuel surcharge can be seen on the monthly credit card bills which goes up to a set percentage of the amount transacted.
This credit card fuel surcharge is usually about1% of the transaction amount, though it may vary. After this, the transaction amount is transferred to the fuel agency according to the agreement made between the credit card issuer and the agency.
What is the Relation Between Card Transaction Charge and Credit Card Fuel Surcharge?
As a credit card holder paying the credit card fuel surcharge when swiping their card at a petrol station, it’s common to question the charging of this transaction fee not from the trader but from the customer. The primary reason for doing this is that usually, the petrol pumps work in a way that leaves them with quite a low profit margin at hand. Therefore, if they start paying the credit card fuel surcharge on credit cards too, they might even lose what little profits they do make. It would negatively affect their profit margin on the whole. Therefore, the real transaction charge is converted to the credit card fuel surcharge and is eventually paid by the customers when swiping their credit cards. When this happens, the fuel station earns the total amount paid by the customer during the transaction. Therefore, credit card fuel surcharge is the transaction charge of about 1% that is paid in excess of the actual charge of the fuel. The fuel surcharge can also be a bit more due to the addition of GST tax to it. To comprehend this better, let’s say that a credit card user gets fuel worth Rs 1000 at the petrol station, after adding the credit card fuel surcharge and the GST tax to it, it would total up to Rs. 1000 plus the credit card fuel surcharge and GST.
What is Credit Card Fuel Surcharge Waiver?
There are many credit cards which claim to provide the benefit of a credit card fuel surcharge waiver for the credit card users who swipe their cards at fuel stations. However, these credit card issuing corporations do not highlight the fact that the GST added to the transaction amount along with the credit card fuel surcharge is not added to this waiver. This means that if the credit card user spends Rs. 5000 on fuel on a monthly basis, there will be an added credit card fuel surcharge and GSTto this too. The fuel surcharge will be waived off but the GST will still be accrued to the charge of fuel. But this does not constitute a large percentage of the transaction amount.
Conclusion
There are many credit cards which claim to provide the benefit of a credit card fuel surcharge waiver for the credit card users who swipe their cards at fuel stations. However, these credit card issuing corporations do not highlight the fact that the GST added to the transaction amount along with the credit card fuel surcharge is not added to this waiver. This means that if the credit card user spends Rs. 5000 on fuel on a monthly basis, there will be an added credit card fuel surcharge and GSTto this too. The fuel surcharge will be waived off but the GST will still be accrued to the charge of fuel. But this does not constitute a large percentage of the transaction amount.
