Visa to reduce transaction fees for gas stations

/ Source: The Associated Press

Visa Inc. on Thursday said it will reduce the transaction fees it charges gasoline retailers, who have complained that their profits are being eroded by them.

The fees are a fixed percentage of every transaction, usually just under 2 percent. So each time gasoline prices go up, so does the dollar amount of the fees, eating away at profit margins.

With gas topping $4 a gallon, that pushes fees toward 10 cents a gallon, close to the typical gas station's markup of 11 or 12 cents per gallon.

The credit-card company said its changes will lower fees by 14 percent on a $60 fill-up, and by 43 percent on a $120 gasoline sale. Visa also said it would cap its fee for debit-card purchases at 95 cents.

MasterCard last year capped interchange fees for gas purchases of $50 or more.

Congress has stepped up its scrutiny of the industry's "interchange fees" in recent months. Legislation in the House would require Visa and MasterCard to negotiate the fees directly with merchants, and if an agreement couldn't be reached the rates would be set by a three-judge panel.

Visa's fee reductions will initially benefit the bottom lines of gas stations, whether they are independently owned or controlled by major oil companies.

Bill Sheedy, global head of strategy for Visa, said in a written statement that "we hope to see oil companies pass these savings along to their stations and ultimately to consumers."

The National Association of Convenience Stores says that its members paid roughly $7.6 billion in credit card fees last year, while making $3.4 billion in profits.

Roger Randolph, the manager of Mr. Ed's Chevron in St. Albans, W.Va., gained attention last week by banning the use of credit cards at his gas station, because interchange fees were erasing his profits. He said Thursday he's glad to hear about Visa's plan, although he's going to wait and see how it works before deciding whether to reinstate credit-card use.

Randolph said the all-cash experiment has been working well, and he's now seeing a profit of about six cents per gallon. The main question for him is whether Visa's plan would knock that figure back into the loss category, he said.