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Visa changes aim to ease gas pain

Jeremy Simon

There may be some relief from excessively high gas prices at the pump. Visa has announced that starting next month it is lowering transaction fees on gas purchases and easing restrictions on holds and blocks.

Soaring gas prices have been a pain in the wallet for consumers — and they aren’t much fun for businesses that sell fuel, either, as their profits get eaten up by transaction fees that have risen alongside the price of gas. The past year has seen “a nearly 100 percent jump in the price of crude oil,” according to U.S. Energy Information Administration stats cited in Visa’s press release. That increase “has driven gas prices in the U.S. from an average of $2.98 a gallon in June 2007 to $4.07 in June 2008.”

“In this extraordinary environment, Visa’s combination of fuel-payment changes can provide consumers with increased purchasing power at the pump and offer fuel merchants opportunities to improve their business operations,” Visa said.

Visa can’t do much about the price of gas. As the leading electronic payments network operator, however, Visa can do something about the cost of credit card transactions fees. “While Visa cannot lower the price of crude oil, there are things we can do to help make the process of buying gas easier for our cardholders,” said Bill Sheedy, Visa’s global head of corporate strategy and business development, in the press release. “And by lowering our rates, we hope to see oil companies pass these savings along to their stations and ultimately to consumers,” Sheedy said.

Visa says it will trim the interchange fees merchants are charged for processing credit card transactions starting July 18. Interchange fees for Visa consumer debit cards will be capped at $0.95 per transaction. Credit card gas purchases have been restructured into a single, lower rate begining system wide in October. “In the meantime, Visa is willing to work with fuel merchants and their acquirers individually to process credit transactions at these lower rates, ahead of October,” the press release said.

MasterCard capped interchange fees last year on gas purchases of $50 or more. “MasterCard heard gasoline dealers’ concerns about fees on rapidly rising gasoline prices and responded,” the company said in an email. “MasterCard has given relief at the gas pump by capping interchange fees on fuel purchases. MasterCard’s cap on interchange fees, which has been in effect since April 2007, applies to MasterCard consumer credit and debit fuel transactions of about $50 or more.”

While gas prices have been high for some time, the move by Visa comes as some gas stations have gained publicity in the past few weeks for rejecting credit card payments while others offer discounts for purchases with cash. Gas station owners have complained that interchange fees are erasing their profit margins.

Beginning this fall, Visa will also address the problem that higher oil prices mean for the limits gas stations impose on purchase amounts. Known as “holds” or “blocks,” these limits kick in to prevent theft, since gas stations are unaware of the end charge amount when a card purchase is initially approved. However, they can have the unwanted result of cutting off a purchase mid-pump.

“Visa will implement Real-Time Clearing, which represents a fundamental change and significant improvement in how fuel transactions are processed. With Real-Time Clearing, transactions will be processed immediately instead of at the end of the day,” the press release said. “This can significantly reduce the hold times that financial institutions place on cardholders’ accounts. Gas stations will send a final transaction amount within hours — if not minutes — of a cardholder’s purchase. Current fuel-payment processing can take up to two days or more.”

Starting July 18, Visa fuel transactions up to $125 will qualify for its “best-available” interchange rates. The interim step will run through October 2009. “Once gas stations and their financial institutions migrate to Real-Time Clearing, consumer fuel transactions up to $500 can qualify for Visa’s best available interchange rates,” Visa said.

See related: Gas prices take toll on family visits, Gas buyers fume at credit, debit card limits, ‘blocks,’ Coping with the gas pump, Gas station owners challenge credit card fees

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  • Given that Visa and MC make more for doing essentially the same thing (processing the same amount of fuel purchased but at a higher per gallon price) it’s good to see them “giving back” some.
    Wonder what other opportunities there are for some corporate goodwill and consumer relief. Would seem like anything hit by particularly strong inflation would be a candidate for a similar program – the grocery store, perhaps? Not holding my breath, but you never know!