Why Do Gas Stations Charge More for Credit? | Chase (2024)

FAQs

Why Do Gas Stations Charge More for Credit? | Chase? ›

Gas stations are in fact legally allowed to charge a customer extra if they choose to use a credit card to purchase gas. This is because the gas station owners pay an interchange fee to the payment networks. They often pass this fee on to the consumer to recoup that additional cost.

Gas stations are legally able to charge extra for using a credit card. A surcharge passed on to the customer allows them to recoup the fees that the Visa and Mastercard payment networks charge them for transactions.

When a consumer uses a credit or debit card to purchase gas, there is an authorization hold placed on the card. An authorization hold is the practice of authorizing electronic transactions of a specified amount (usually more than the expected transaction amount) and holding this balance until the transaction clears.

Some businesses (like gas stations and hotels) will place a temporary charge on your payment card. Since pumping gas is an open-end purchase, gas stations will typically pre-authorize your payment card for a larger amount to ensure that your card has enough funds to cover the amount of gas you'll leave with.

“When a merchant intends to surcharge, they are offsetting the costs that they would be paying by applying a surcharge to the transaction. The name 'surcharge' is to advise consumers that there is an added fee—which is the cost of accepting the credit card they are presented with—to their total checkout amount.”

To date, only two states and one jurisdiction still outlaw the use of credit card surcharges. They are a result of non-qualified transactions of different communications methods.: Connecticut, Massachusetts, and Puerto Rico.

It's called a "pre-authorization hold, " and they are getting bigger as gas prices rise. Kroger, the nation's largest grocery chain, raised the temporary hold from $125 to $150, meaning you must have $150 in your checking account to buy gas with a debit card. Luckily, the charge was removed 24 hours later.

Some Credit Cards offer waiver of 1% fuel surcharge fee when the card is used to purchase fuel. To get the waiver you will need to purchase fuel for a fixed amount, (usually a range). There may also be a certain maximum waiver that is permitted per credit cycle.

These hold fees do disappear anywhere from a few hours up to two days, but if you are using a debit card and don't have the extra money on your account you could face more overdraft fees. $125.00 used to be the maximum hold charge but due to rising gas prices, Visa and MasterCard raised it to $175.

Pre-authorization holds can frustrate consumers who rely on their debit cards for day-to-day transactions, because the hold can tie up funds, and unsuspecting consumers may have other transactions declined until those funds are released. The charge can remain on your account for one to seven business days.

Why did I get overcharged at the gas station? ›

Gas stations put a hold on the card to make sure you have the money to cover what you bought. Sometimes it takes a while to process, so they hold an amount they know is more then what you owe. (It's a hold, so you're not actually paying more.).

If you don't have enough funds in your account, the transaction will be declined. When you choose to run your debit card as credit, you sign your name for the transaction instead of entering your PIN. The transaction goes through Visa's payment network and a hold is placed on the funds in your account.

If the debit card is attached to an account that does not have sufficient funds, and if there is no overdraft protection on the card, the transaction will simply be declined and the gas pump will not release any gas.

In 1985, California passed a law (Civil Code section 1748.1) that prohibited merchants from adding a surcharge (an extra fee) when customers pay by credit card instead of cash.

Is Debit Card Surcharging Legal? For debit cards and prepaid cards, surcharging is prohibited—even when the card is run as a signature-based transaction without the PIN. This restriction was implemented by the Durbin Amendment of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

It is normally a small percentage, usually around 1% to 2.5% of the fuel purchase amount or a fixed amount added to the transaction. This surcharge compensates the Credit Card company for the processing costs associated with fuel transactions at the pump.

Each time a merchant accepts and processes a credit card transaction, they pay a processing fee to the appropriate financial institution. A credit card surcharge (or cc surcharge) is a fee enforced by the merchant to compensate for some of the cost of payment processing.

At the average of 2.5 percent, a $50 transaction requires retailers to pay card companies $1.25. If gas prices are $5 per gallon, a $50 transaction only includes 10 gallons of gas, and at a 10 cent up-charge, the gas station only gets $1 to cover the $1.25 the card company takes from the transaction.

The authorization limits are a compromise between liability for the merchant and the average consumer gas purchase. Most car drivers will never run into the limit. Only truckers and RV drivers have to deal with it regularly, except when gas prices rise.