ALEXANDRIA, Va.—With gas prices at a 14-year high, drivers are not only paying much more, they’re hitting fuel limits at the pump not allowing them to get a full tank of gas, reports the Washington Examiner.
Many fuel pumps do not allow transactions over $75 because that’s the highest amount that credit card companies will reimburse a gas station if a charge is fraudulent or disputed.
Even going a penny over $75 puts the convenience store at risk of not having any of the transaction covered, Jeff Lenard, NACS vice president of strategic initiatives, told the Examiner.
Though the $75 limit isn’t new, many drivers have never had to pay near that amount—until now.
“The way it seems to have been for me is I hit a $75 hold limit, and the pump shut off,” Jonathan Moore, an engineering and project management consultant, told the Examiner. Moore was later able to swipe a second time.
Moore had never encountered this issue before, he said. “I’ve just never had an opportunity to fill above $75.”
“There were troubling stories when people were driving and they couldn't pay for things with their debit cards,” Lenard told the Examiner. “After they had this high hold on their bank account, they couldn't get more gas. They couldn't get food and things like that. With so many people [using] debit cards now and with so few people paying by cash, these credit card shut-offs, points and debit holds are becoming a big deal.”
Lenard told the Examiner that the pump limits are “inconvenient, and it comes at a bad time when people are already upset. It’s certainly not something that retailers want. But that's the dynamics of the situation with the credit card companies.”
In early 2020, 77% of drivers paid by plastic (44% by credit and 33% by debit card), but by May 2020, when coronavirus-related concerns emerged and consumers sought to minimize personal contact, a whopping 86% of fuel customers paid by plastic.
An average fill-up takes three to five minutes and is relatively simple. But there is a lot of complexity behind the scenes related to payments and how paying by cash, credit or debit affects the refueling experience. NACS addresses some common topics related to payment cards and fueling in the Fuels Resource Center.
Swipe-Fee Headache
When card-paying consumers have to make two transactions just to fill up their tank, credit card companies get a double benefit due to swipe fees.
In the U.S., credit card swipe fees remain one of the highest operating costs for convenience store retailers after labor, according to NACS State of the Industry data. Consumer preferences for more touch-free transactions and the coin circulation challenge in summer 2020 led to record debit and credit card usage at convenience stores. In 2020, 74.6% of all transactions were paid by plastic, and overall card fees paid by the convenience store industry were $10.7 billion, NACS SOI data indicate.
The Merchants Payments Coalition has called on Congress to investigate Visa and Mastercard’s anticompetitive dominance over the U.S. credit and debit card markets.
Swipe fees for Visa and Mastercard credit cards average 2.22% of the purchase price and totaled $61.6 billion in 2020, up 137% over the prior decade, according to the Nilson Report. When all types and brands of cards are included, processing fees totaled $110.3 billion in 2020, up 70% over 10 years.
Swipe fees mean merchants receive less than 98 cents on the dollar when customers pay by credit card, and merchants have to set prices higher to make up for the loss. The fees amount to an estimated $724 a year for the average U.S. family.
Because the fees are a percentage of the transaction amount, the amount collected rises as prices rise, the Merchants Payment Coalition points out. When a $100 item increases to $107 based on the 7% inflation seen in 2021, swipe fees increase from $2.22 to $2.38, for example.